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Legal Issues to Consider
in the Day to Day Running of Your Business
Marion Kinshuck
4th September
2007
漏 Flying Start 2005
Topics
Contracts
Protecting Ideas and Brand
Identity
Regulation
Contract
A contract is the basis of
all business relationships.
It sets out the obligations
that each person involved in the contract ( a contracting party) is
to take on.
The parties are free to agree
the terms of the contract between them.
If there is a dispute about
performance of a contract the courts will settle the dispute based on
what the parties have agreed.
Contracts
There is no need for a contract
to be in writing. In the event of a dispute the courts will look at
the evidence to see what has been agreed.
The advantage of a written
contract is that it provides certainty.
There is no need for a written
contract to be signed.
Standard Terms of Sale
Many contracts are on a supplier00
(or purchaser00) standard terms of business.
If your business is selling
goods other than to retail customers, or if it is providing services,
then it is important that you trade on written standard terms of
business.
Standard Terms of Sale
N.B If you do not have standard
terms of business, there is still a contract with your customer, but
its provisions will be those implied by law or those in your customer00
terms of purchase. These are unlikely to be as favourable to you as
terms you put in your standard terms of business.
Standard Terms of Sale
Standard Terms of Business
should deal with the following issues:
Who the contract is with.
What is to be provided.
Price (and should specify
any items such as delivery which are not included in the price).
Time for payment (Consider
whether a deposit is payable in advance).
VAT (is the price inclusive
or exclusive of VAT).
Standard Terms of Sale
Delivery
Are goods to be collected,
or will they be delivered to the customers premises. Are delivery dates
estimates only or are they fixed?
Can goods be delivered by
instalments.
Standard Terms of Sale
Title
When is ownership of goods
to pass.
Consider including a retention
of title clause. If a clause is included it must include a right to
repossess goods.
When is risk to pass.
Liability
Remedies for breach of contract
Right to reject goods.
Damages.
Cancellation of the contract.
Standard Terms of Sale
Consider restricting liability
in certain circumstances to repairing or replacing goods supplied.
Where your business will incur
financial liability to customers, consider limiting the extent of your
liability.
It is essential that the limit
on the business00liability is linked to its level of insurance.
If this is not the case then your business00liability may be unlimited.
Standard Terms of Sale
Termination
Contract should terminate
when services have been
performed; or
On expiry of a fixed period;
On notice
On insolvency or anticipated
insolvency of the customer.
Standard Terms of Sale
If you are providing services
it is important to specify what is NOT included in the price that you
have quoted.
It is important to consider
the rights in the material you have created and the extent to which
the customer can use these.
The terms of business must
contain a mechanism for varying the services and agreeing a price for
any variations.
Standard Terms of Sale
If you are proposing to sub-contract
some of the services the contract should state this.
DO NOT INCLUDE clauses which
impose restrictions on the prices at which goods can be resold. Clauses
of this type are unenforceable and can result in fines of up to 10%
of turnover.
Purchase Contracts
Clauses to be wary of:
Indemnities
As a general rule do not
agree to an indemnity which is not backed by insurance.
If a contract is for a
fixed term check it is not terminable on notice.
Purchase Contracts
Clauses which seek to impose
a large penalty for early termination. These are unenforceable and are
a bargaining ploy to try and prevent the buyer from terminating.
Clauses which allow the supplier
to impose unreasonable price rises.
Clauses which limit the suppliers
obligation to provide you with goods.
Clauses excluding and limiting
liability.
Purchase Contracts
Before agreeing to a purchase
contract with another party which is on their terms
read it ;and
check you are happy with
it. It is likely to protect their interests not yours.
If you can00 face reading
the contract, or don00 understand it, pay a lawyer to read it for
you! It will save you money in the long run!
Protecting your Ideas
and Your Business00Identity
As well as any tangible items
that it owns, (such as equipment, buildings and stock) your business
may own intellectual property.
Intellectual property is essentially
ownership of ideas, designs, and written material.
Intellectual property is important
as it can be used to generate income for your business in the same way
as tangible property.
Types of Intellectual
Property
Copyright
This is the right to prevent
other people from physically copying material that you have produced.
Protects written material,
photographs, drawings, digital recordings and computer software.
Arises automatically on creation
of the copyright material.
Types of Intellectual
Property
Trade Marks
Prevents another business
from using a similar name or style of identification in a similar business.
Can be registered or unregistered.
To rely on an unregistered trademark must be able to prove that the
name or style has become associated with your business in the
marketplace.
There is a fee for registration.
Types of Intellectual
Property
Patents
Protect inventions. Does not
apply to methods of doing business.
Must be applied for.
If granted give a twenty year
monopoly right to exploit the invention.
Types of Intellectual
Property
Design Right
Similar to copyright except
that it protects designs.
Arises on creation.
Types of Intellectual
Property
Registered Design.
Has to be applied for.
If granted grants a monopoly
right to produce objects to a particular design.
Types of Intellectual
Property
Know How
The most difficult to protect.
This is the general knowledge within the business of what it does and
how it does it. Includes knowledge of business processes.
Can only be protected by way
of a confidentiality agreement.
Types of Intellectual
Property
Always ask prospective collaborators,
long term customers or lenders such as banks to sign a confidentiality
agreement before you disclose sensitive information about your business
to them. The agreement should make it clear the uses to which the information
disclosed can be put.
Regulatory Issues
There are many regulations
which may affect your business. This is particularly the case if you
are selling to consumers.
You should be aware of the
following if dealing with consumers:
The Distance Selling Regulations
These govern selling
via the internet or telephone.
Require certain information
to be given to the customer prior to delivery.
Give the customer the right
to cancel the order or return the goods.
Regulatory Issues
Door Step Selling Regulations
Give the customer the right
to cancel if selling door to door.
The Consumer Credit Act
Applies where a consumer
is allowed to pay the price in four or more instalments.
Requires the consumer to be
given certain information before entering into the contract , otherwise
it is unenforceable without a court order.
Regulatory Issues
Gives the customer the right
to cancel within seven days.
The Unfair Contracts Terms
Act and The Unfair Terms in Consumer Contracts Regulations
Between them they require
contracts with consumers to be in plain English and to be 00air00
Any unfair terms may be unenforceable.
Regulatory Issues
Terms of business which are
suitable for business sales are unlikely to be suitable for sales to
consumers. If you have standard terms of business for business to business
sales and you then decide to trade on the internet you may need terms
of business appropriate to consumer sales.
Regulatory Issues
Data Protection Act
This governs what is done
with data about living individuals including use of customer data in
future marketing campaigns.
It is only permissible to
use customer data for marketing purposes if the customer consents to
its use.
Regulatory Issues
Legislation specific to the
market in which you trade.
Examples include:
The licensing laws in the
alcohol industry;
Packaging and labelling requirements;
Compliance with safety standards;
The WEEE Regulations relating
to the recycling of electrical equipment.
Questions
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