Checklist: contract negotiations: key issues

This checklist highlights the key issues to consider when negotiating contracts on behalf of your business. You should always take legal advice if you are negotiating a large or unusual contract.

Who is the other party to the contract?

•    Do you know the other party? Have you done business with it
      before?
•    Consider doing a credit check if you haven’t dealt with the
      other party before.
•    If the other party is based abroad, make sure that you take
      legal advice to  ensure that you are properly protected
      if things go wrong.

Is the identity of the other party important to the performance of the contract?

•    Are there specific individuals who you want to perform the
      services?
•    Are you happy to allow the other party to sub-contract some
      or all of  the work or pass on the benefits of the contract to
      others?
      If not, this must be made clear in the contract.
•    If the other party is a company, would you mind if ownership
      changed, for example, if a competitor took control?

What are you buying or selling?

•    The majority of contractual disputes relate to what services
      are to be performed or goods to be delivered.
•    Describe the goods and services as clearly and accurately
      as possible to avoid risk of disputes.
•    Any important issues and assumptions should be confirmed
      in the contract – do not rely on verbal assurances or points
      agreed during negotiations.
•    List what the other party should and should not be doing.

What is the price and how is payment to be made?

•    Is it a fixed sum? If not, how is it to be determined?
•    Are delivery costs included in the price and/or installation?
•    How is payment to be made? For example, cash,
      electronic bank transfer or bankers’ draft.
•    When is payment due? Is it a single lump sum or by
      instalments.

What happens if things go wrong?

•    What could go wrong with the deal and what loss could you
      suffer as a result? Consider all possible consequences.
•    If buying, try to ensure that the seller is responsible for all
      possible losses (including consequential losses) and that
      is not limited in any way.
•    If selling, try to limit liability to a fixed sum. Resist   
      any responsibility for consequential losses as these
      may be far greater than the contract amount and impossible
      to quantify.
•    Take legal advice before agreeig any clause that seeks
      to limit liability under a contract.

Is the deal time critical?

•    When do you want the work done or goods delivered?
•    A clear timetable is essential, especially if price is tied
      to delivery or performance dates.
•    Do you want to be able to end the contract or to impose
      a financial penalty if work or goods are delivered late?

In what circumstances might you want to pull out of the contract?

•    How long do you want to be tied to the contract?
•    Can you set a fixed period of time or do you need to include
     a right to terminate by giving notice to the other party?
•    Are there any circumstances in which you would wish to
     terminate the contract immediately? For example, if the other
     party damages your reputation or goes bust.

Are there any brand, copyright or other intellectual property issues?

•    Is the other party creating something specifically for you?
     For example, an advertisement.
•    Are you going to use their brand or vice versa?
•    Make sure you take legal advice to ensure that the correct
      formalities are followed otherwise valuable assets may be lost.

Is there a payment, performance or enforcement risk?

Remember that if anything goes wrong, the protections
in a contract are only as good as the person giving them.
If they have no money it will be very difficult to get any compensation.
Consider requiring security (for example, a guarantee or retention).

Are you dealing on standard terms?

•    Most companies have standard terms of business drafted in
      their favour.  If your terms conflict with the other party’s,
      you will  need to make sure that yours apply rather than theirs.
•    Be wary of purchase orders or delivery notes. These can have a
      party’s standard terms of business included on them.
      By signing a delivery note, you may inadvertently commit
      yourself to the seller’s terms.
•    Always be clear about the terms on which you are dealing.
      If in doubt, take legal advice.

More information

If you have any questions about the content of this checklist,
please contact Jennie Borgnis on jennie@butcherandrews.co.uk
or Fiona Duff on fiona@butcherandrews.co.uk

Q. When I retire I will move from our family home in Kent to Norfolk. If I let my son and his wife live in the home without charging them rent, but on the basis that they pay the mortgage, does this create a formal landlord and tenant relationship? I am concerned about the implications for home insurance and my tax liabilities. JM, Kent.

 A. Fiona Duff, solicitor advocate with the Butcher Andrews law firm in Norfolk, says: “Provided no rent is paid, that your son and his wife pay the monthly mortgage interest charges direct to your mortgagor and it’s not intended that the payments towards the mortgage charges are in exchange for your son and daughter-in-law living at the property (which could be construed as rent), a landlord and tenant relationship would not arise. The arrangement would be construed as a licence.

“Payments towards a mortgage may result in having the unintended consequence of your son and daughter-in-law creating for themselves a beneficial interest in your property in Kent – although this argument isn’t terribly strong if the payments only clear the monthly interest on the mortgage, as opposed to reducing capital.

“There are, however, practical issues to consider. What happens in the following scenarios: The mortgage interest payments can no longer be paid; You need to go back to live at the house in Kent; You need to go into care?

“It would be better to formalise the relationship by visiting a solicitor and providing formal instructions so that a written licence may be created setting out clear outcomes should certain events occur and to negate the possibility of any potential future disagreements between you all concerning whether or not your son and daughter-in-law were tenants, licensees or had a beneficial interest in your house.

“Another reason to formalise the relationship would be to clearly document the payments and their purpose so as not to run the risk of the Inland Revenue construing them as income payments for tax purposes and to [provide] evidence to your mortgage company that you are not letting out your property.

“There are other issues, such as notifying your insurance and mortgage companies that you will no longer be at the property and instead your son and daughter-in-law will be residing there, to avoid falling foul of your insurance terms or the conditions of the mortgage. You should also check with your accountant whether there are any other tax implications.”

 The Independent – Money , Spend – Save, Questions & Answers 13/2/12

This  information is intended to be useful and informative for clients of Butcher Andrews Solicitors. Butcher Andrews Solicitors will use reasonable care to ensure that information is accurate at the time of publishing. However, it does not constitute legal advice in relation to any particular matter and the content will not hereby be updated immediately following any changes in the law.

 

 Checklist: remedies for breach of contract

This checklist sets out the main remedies available to your business for breach of contract.

When does a breach of contract occur?

• A breach of contract occurs when a party to a contract fails to perform some or all of its obligations in the contract. It entitles the other party to claim damages for any loss it suffers.
• When a breach of contract is sufficiently serious (for example, if a key contractual term has been breached), the other party is entitled to treat itself as being discharged from further obligations under the contract, instead of or as well as, claiming damages.

Damages for breach of contract

• The main remedy available to your business for breach of contract is an award of damages. In contract claims, damages can be claimed whenever a contract has been breached, even where there is no actual loss, although damages in these types of cases will be small.
• Damages in contract aim to put the injured party in the position they would have been in if the contract had been satisfactorily performed.
• Not all losses from a breach of contract will be recoverable (for example, some losses may be regarded as too remote to be recoverable).

Liquidated Damage Clauses

• A liquidated damages clause pre-sets the damages recoverable for a specified breach of contract.
• Provisions for liquidated damages frequently appear in all sorts of commercial contracts, both in individually negotiated contracts and in standard terms of business. They are commonly found in contracts for construction, engineering and supply or sale of goods.
• If a contract contains a liquidated damages clause:
  • your business must merely show that the relevant breach has occurred;
  • your business does not have to prove actual loss;
  • the amount recoverable is not left for the court to decide; and
  • the agreed figure should be a genuine pre-estimate of the loss likely to be caused by the specified breach.

Equitable remedies

Equitable remedies are awarded at the discretion of the court. An equitable remedy will normally only be granted where damages would be an inadequate remedy for your business.

Rectification

• Rectification only applies in the case of written contracts. Its main purpose is to correct mistakes made in recording agreements.
• The courts can rectify a written agreement that does not reflect the true bargain between the parties. There is no limit to the amount of rearrangement or correction that the court may allow.

Rescission

Rescission is the setting aside of a contract. The parties are put back into the position in which they were before the contract was made. It may be available where a contract has been concluded as a result of:

• Misrepresentation.
• Mistake.
• Duress.
• Undue influence.

Specific performance

Specific performance is a decree by the court to compel a party to perform his contractual obligations. It is often ordered in building contracts.

More information
If you have any questions about the content of this checklist, please contact Jennie Borgnis or Fiona Duff on:

 

Jennie Borgnis 
E:  jennie@butcherandrews.co.uk
T:  01328 820830  

Fiona Duff
E: fiona@butcherandrews.co.uk
T:  01328 820810

Changes in Employment Law

 For claimants, there is good and bad news.

The bad news is that the qualifying period for unfair dismissal claims
will be increased from one year to two. 
It will apply to all employees who start work with a particular employer
on or after 6^th April 2012. The one year period continues for those whose
employment had already started  before that date.

The good news is that the sums that Tribunals are able to award in those
areas to which compensation caps apply come into force this month (February 2012). 
For unfair dismissal awards, the cap is increased from £68,400 to £72,300. 
The maximum week’s pay figure increases from £400 to £430.

The government’s proposal to introduce fees in the Tribunal is still the subject
of consultation (see our earlier article), but it is suggested that the fee to lodge
a claim could be as much as £250, with a hearing fee of up to £1,250. 
Where a claim is made for sums of over £30,000, the proposed
initial fee could be as much as £600 and the hearing fee £1,750.

There are still many problems to be ironed out, not least that claimants
who have recently lost their jobs may be unable to pay such sums up front and
consequently may be denied access to justice through the Tribunal system.

On a procedural note, the Employment Tribunals Act 1996 (Composition) Order 2012
is expected to come into force on 6^th April.  This Order will allow Employment Judges
to sit alone, i.e. without ‘wing’ members, when hearing unfair dismissal cases. 
This is designed to save time and costs of up to an estimated £4.5m a year. 
However,  many people believe that the wing members bring to the Tribunal
valuable insights into the real and current world of the workplace and thereby
prevent an over legalistic approach to employment disputes. 

In addition to these and other reforms due to be implemented in April,
the governmenthas indicated that there will be further significant changes
in the field of employment law. 
It remains to be seen how much of an impact these changes will have
on access to justice and the way in which lawyers will be compelled to
conduct claims on behalf of their clients.

 For further details, please contact Jennie Borgnis

Jennie Borgnis 
E:  jennie@butcherandrews.co.uk
T:  01328 820830

Landlord and Tenant news  -  A Warning to Landlords

If you are a landlord who has multiple properties on your books, you should be
warned about a recent Court of Appeal decision in Saxon Weald Homes Ltd
v Chadwick [2011] EWCA Civ 1202.  The Court held that although a letter was
sent in error by a landlord’s employee, it constituted a notice because its
contents were clear and unambiguous, the effect of which was to convert the
tenant’s assured shorthold tenancy (AST) into an assured tenancy. 
There are key differences between ASTs and assured tenancies (see below).

In this particular case, the tenant had been granted an AST for a probationary
period of one year. The AST stated that if the tenant successfully completed the
probationary period, the AST would be converted to an assured tenancy.
The tenant breached the AST with anti-social behaviour and the landlord sought
possession of the property before the end of the probationary period. 
However, the landlord’s housing manager was unaware of the chain of events
and sent out a standard letter, clearly stating that the AST had been converted
into an assured tenancy due to the tenant’s successful completion of the probationary
period.

The Circuit Judge on appeal and the Court of Appeal considered the true interpretation
of the contents of the letter and found it to be plain in meaning and the tenant was entitled
to rely upon it.  When the landlord stated that the tenant should have disregarded the
letter given that a notice to quit had already been sent informing the tenant that his
tenancy was to be brought to an end, the Court of Appeal added that a tenant was
not ordinarily expected to enquire into, or think about, a landlord’s reasons for serving
an otherwise unambiguous notice. 

While the legal argument of ‘mistake’ wasn’t initially pleaded (and so couldn’t be
considered by the higher courts) and may well still be a ‘get out of jail card’ for
landlords in these circumstances, it is far better that landlords should ensure
they have effective procedures in place to ensure that standard letters
confirming a tenancy are not sent out automatically.     

Key differences between ASTs and assured tenancies

• Although a landlord must obtain a court order for possession
  where a tenant with either an assured tenancy or an AST does
  not vacate the premises, the procedure is  easier in the case of an  AST.

• To gain possession in the case of an AST, the landlord must serve a
  notice on the tenant, giving the tenant at least two months’ notice that
  the landlord requires possession.  As long as the landlord has correctly
  served this notice, the court must order possession.

• With an assured tenancy, however, the landlord will only obtain a court
  order for possession if they follow the correct procedure and can establish
  one or more limited grounds for possession.

More information:

 If you have any questions about the content of this article, please contact Fiona Duff

Fiona Duff

T: 01328 852810 
E:  fiona@butcherandrews.co.uk

Potential pitfalls await unprepared buyers of newly built homes warns CQS
accredited Butcher Andrews Solicitors.

Home buyers choosing to purchase newly built properties face pitfalls with yet further
complications when buying a property before it is even built or where it is only partly
built, says Butcher Andrews Solicitors in Fakenham.

Butcher Andrews,  which earlier this year secured the Law Society’s Conveyancing
Quality Scheme status, says that the legalities of buying newly built property differ
from buying a second hand property and there are different factors to consider such
as whether the property will be approved as suitable for occupation and whether the
new roads and drains will be built properly.

The warning comes as recent research by Which? shows that more than half of
those homeowners surveyed who had bought a newly built property in the last five
years experienced problems, including delays and unexpected additional costs.

Kit Mordaunt, Partner and Head of the Residential Conveyancing department
said: “Buying a new home requires some additional preparation in advance with your solicitor.
Establishing whether the plans reflect what is registered at the Land Registry and
finding out whether the property complies with all of the planning and building
regulation requirements are particularly important for newly built properties.

“In addition, making sure the contract sets out everything the builder has agreed to
do, such as laying a lawn, installing additional sockets and laying carpets is
important.
“At Butcher Andrews we are familiar with the tighter deadlines, pre-exchange
contract issues, as well as the special procedures including the need for an
additional valuation involved in obtaining a mortgage for a newly built home.”

Butcher Andrews says that a raft of legal issues needs to be checked,
such as planning permission, rights of drainage and water supply, as well as rights to
use all pipes and cables to the property. Your solicitor will also ensure that building
regulations have been adhered to, a special insurance for new homes is obtained
and issues relating to roads on the estate where the property is being built comply
with the Highways Act.

Kit Mordaunt adds: “Buying a newly built house comes with many benefits – no chain,
a brand new home and often appealing finance packages on buying.
However, the downside is that there is more to it than signing on the dotted line.
Getting help from a CQS accredited solicitor such as Butcher Andrews
should be the first port of call when buying a newly built house.”

Butcher Andrews  underwent a rigorous application and assessment by the
national Law Society to become part of CQS initiative, which recognises high quality
in residential conveyancing. CQS has the support of the Council of Mortgage
Lenders, the Building Societies Association, Legal Ombudsman and the Association
of British Insurers. 

Kit Mordaunt

E:  kit@butcherandrews.co.uk
T: 01328 852807

“Staycation” second homes can be legal minefields.

 The popularity of second homes in the UK, which are often used as holiday homes, could expose owners to a “minefield” of risks.

 The popularity of “staycations” – staying in the UK rather than travelling overseas for a holiday – has seen more second homes being used by “staycationers.”

 Statistics from the English Housing Survey: Household Report 2009-10 shows that there are 279,000 second homes in England, but Butcher Andrews Solicitors, which holds the Law Society’s excellence in home buying accolade – the Conveyancing Quality Scheme (CQS), is warning that owners are not always aware of the potential problems of owning a second home.

 Kit Mordaunt, Partner and Head of the Residential Property Department , says: “Second homes are often unoccupied for long periods of time. However, they could become targets for squatters, or there could be legal considerations to take into account when renting them out for short periods to holiday makers, and there are often insurance issues to take into account, not to mention the types of issues that come with buying any home, such as any legal anomalies or liabilities attached to the property.

 ”There are also tax implications for second home owners that need to be considered.

 “It is essential that anyone buying a second home contacts a CQS accredited solicitor such as Butcher Andrews to look at the potential risks and benefits of buying.

 ”Equally, anyone who already owns a second home for their own holiday purposes, but plans to let it be used by family members or others for extended periods could be changing its status as a holiday home without realising.

 ”During off seasons second home owners might look to rent out the property for long periods of time and suddenly you have a landlord and tenant relationship which carries with it a host of additional obligations and liabilities.”

 Butcher Andrews underwent a rigorous application and assessment by the national Law Society to become part of CQS initiative, which recognises high quality in residential conveyancing. CQS has the support of the Council of Mortgage Lenders, the Building Societies Association, Legal Ombudsman and the Association of British Insurers.

  Kit Mordaunt

E:  kit@butcherandrews.co.uk
T: 01328 852807

Buyers must consider worst case scenario when “buddying up” on property ladder

Home-buyers who “buddy up” with a friend or relative in order to afford their first home must factor in all worst case scenarios before buying, says Butcher Andrews Solicitors in Fakenham, Norfolk.

Butcher Andrews Solicitors, which earlier this year secured membership to the Law Society’s prestigious Conveyancing Quality Scheme, which recognises high standards in home-buying, is warning those looking to buy their first home with a friend or relative that there is more to consider. Butcher Andrews  says failing to plan for all eventualities, even death, could leave you in difficulty in future.

Kit Mordaunt, Partner and Head of the Residential Property department,  says: “With home loans less accessible than a few years ago joining up with a friend or relative to buy a home is a good alternative. However, there is much more to consider when buying this way. There is a high possibility that one party to the joint ownership’s circumstances could change, so it is vital to consult your solicitor early on to cater for every possible change in circumstance.

“Sometimes a co-ownership contract might be necessary, but at the very least Butcher Andrews can highlight all the options and possible scenarios to both owners. We can also advise on the type of mortgage which might be suitable and how joint ownership fits into your estate and will. There may also be tax implications that we can advise on.

“Circumstances when buying jointly are more likely to change. If you buy with a friend and they subsequently marry or change jobs they might want to move on and not be tied down anymore by the property they jointly own with you. Or if you buy with a family member who doesn’t reside there, but who dies and leaves their share to someone else you may need to factor that into any initial agreement.

“It does sound daunting, but far from put anyone off it is important that you seek legal advice on joint ownership. When it is difficult, as now, to raise a deposit and secure a mortgage on your own buddying up is an excellent way to get a foot on the property ladder, but it needs to be done with legal advice from a CQS accredited firm.”

Butcher Andrews Solicitors underwent a rigorous application and assessment by the national Law Society to become part of CQS initiative, which recognises high quality in residential conveyancing. CQS has the support of the Council of Mortgage Lenders, the Building Societies Association, Legal Ombudsman and the Association of British Insurers.

For more information please contact Kit Mordaunt on 01328 820807 or email kit@butcherandrews.co.uk

Agency Workers Regulations 2010.

These Regulations come into force on October 1^st 2011. The main points for employers to be concerned with are that agency workers with 12 weeks’ consecutive engagement are given the same rights to pay, benefits, rest periods and holidays as are given to permanent workers.

However, an agency who places a worker with another business is responsible for managing the work time of that worker. There are special rules for young workers and night workers.

Individuals who obtain direct employment with an employer through an employment agency do not have the protection of the Regulations.

Guidance on their effects can obtained from the Department of Business, Innovation and Skills but for further details please contact

Employees and workers have employment rights that are not accorded to the self employed or sub contractors.

The Supreme Court has recently handed down a decision confirming the proper tests to apply where there is an argument about employment status: whether someone is, legally, an employee or a worker.

In this case, clauses in the various written contracts that existed between the employer and the worker stated repeatedly that the latter were self employed or ‘sub contractors’. The clauses stated that the ‘sub-contractors’ would be responsible for their own tax and National Insurance and that it was the intention of both parties that the ‘sub-contractors’ should not become employees.

However, the findings of fact in that case indicated that the wording of the contracts was not definitive. Amongst other things, the Supreme Court found that the employer had a sufficient degree of control over the work being performed and who should perform it for the relationship to be one of employer and worker. Accordingly, the workers could claim the right to be paid in line with the National Minimum Wage Regulations 1999 and statutory paid holiday under the Working Time Regulations 1998.

Employers should not be tempted to insert substitution clauses, or clauses denying any obligation to accept or provide work, in employment contracts in an attempt to show that there is no employment relationship. This is because the Employment Tribunal will adopt a test that focuses on the reality of the situation and not simply on the documents, particularly where they do not reflect that reality.

The written contract is only the starting point: it will be trumped by the real situation.

For more information contact:-

Jennie BorgnisT: 01328 852830
E: jennie@butcherandrews.co.uk

 Butcher Andrews Solicitors secures Law Society’s new quality mark

Butcher Andrews Solicitors in Fakenham & Holt has secured membership of the Law Society’s Conveyancing Quality Scheme – the mark of excellence for the home buying process.

Butcher Andrews Solicitors underwent rigorous assessment by the Law Society in order to secure CQS status, which marks the firm out as meeting high standards in the residential conveyancing process.

Law Society President Linda Lee said that the Law Society introduced CQS to help to recognise high standards in the home buying process.

“CQS improves efficiency with common, consistent standards and service levels and enables consumers to recognise practices that provide a quality residential conveyancing service.

“Buying a home is one of the largest purchases anyone will make in their lifetime, so it is essential that it is done to the highest standard by a solicitor. There are many different conveyancing service providers out there, making it difficult for home buyers to identify those which can ensure a safe and efficient level of service.”

Anne Kirby says: “Butcher Andrews is delighted to have secured CQS status. It is recognition of the high standards we provide to our residential property clients and is a signal to future home buyers of the excellent service level we provide at what is often a stressful time for many people.

The overall beneficiaries will be clients who use Butcher Andrews Solicitors when buying a home. They will receive a reliable, efficient service as recognised by the CQS standard.”

The scheme requires practices to undergo a strict assessment, compulsory training, self reporting, random audits and annual reviews in order to maintain CQS status. It is open only to members of the Law Society and to those who meet the demanding standards the scheme will set and has the support of the Council of Mortgage Lenders, the Building Societies Association, Legal Ombudsman and the Association of British Insurers.

For more information on the Law Society’s Conveyancing Quality Scheme visit

www.lawsociety.org.uk/cqs

Or contact the CQS Unit on 020 7316 5550 or CQS@lawsociety.org.uk

Indeed, it has been reported that at least one large insurance company bases its business model on the payment of referral fees.  This does not sit well with the insurance industry’s and media’s claim that the apparent increase in personal injury claims is the main reason why motor insurance premiums have risen so markedly.

What is often lost in these debates is the interests of the client.

The often used phrase ‘compensation culture’ has negative overtones and suggests that it is somehow wrong to make a claim.  Insurance companies are, for commercial reasons and perhaps understandably, keen to promote this view.  However, if someone has been involved in an accident that is not his or her fault, and has been injured, he or she is entitled to be properly compensated. 

Of course, fraudulent claims should be treated with the contempt that they deserve.  However, people who have a genuine claim should not be put off seeking financial redress  and are entitled to expect compensation that properly reflects their level of suffering and their financial loss.

It is commonplace now for people injured in road traffic accidents to be contacted by any number of people professing to be able to act in their best interests.  This may be a trap for the unwary.  It is often the case that the lawyer acting for the injured person is being paid by the same insurance company that acts for the wrongdoer – arguably a conflict of interest.

 In many instances insurance companies can pick and choose which lawyer they send work to, and dictate how much they charge.  In these circumstances, the lawyer may be under severe pressure to settle a claim quickly and for a lower sum than the client deserves.

There are good arguments for and against law firms, and indeed insurance companies themselves, paying referral fees: they can be a simple marketing tool but they can also distort the market and reduce the range of choices available to the client. 

Butcher Andrews is completely independent, and does not pay referral fees to anyone.  Consequently, our solicitors are able to concentrate entirely on the interests of our clients and are not obliged to consider the interests of anyone else.

For more information on the above or for advice on No win – No fee agreements, please contact our Personal Injury Team

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