Edward Barnes, Head of Corporate at DTM Legal, highlights some of the major pitfalls that you must be aware of, and should avoid, during contract negotiations. Always take legal advice if your business is negotiating a large or unusual contract.

Who are you negotiating with?

Does the other party have the authority to negotiate and on whose behalf are they negotiating?

Are negotiations to be confidential?

Get the other party to sign a confidentiality agreement (also known as a non-disclosure agreement or NDA)  before starting negotiations. This should be signed before giving away business sensitive information and should explain that the information given:

• Is confidential.
• Should only be used for a stated purpose.
• Should be returned or destroyed if the deal doesn’t go ahead.

Are you handing over business sensitive information?

• If so, take legal advice. It can be unlawful to hand over certain types of information, such as personal data about customers or employees.
• Does the other party actually need the information or are they simply on a fishing expedition?

Don’t offer or accept bribes or inducements

The Bribery Act 2010 came into force on 1 July 2011 and prohibits:

• Bribing another person.
• Being bribed.
• Bribing a foreign public official.
• Failing to prevent bribery.

The penalties for committing an offence can be very significant – the new corporate offence of failing to prevent bribery is punishable on indictment by an unlimited fine.

Pre-contractual agreements

• If you are negotiating big or complex deals, you may be asked to sign a heads of terms or a memorandum of understanding.
• Take legal advice before signing any pre-contractual agreement. Even it is not meant to be legally binding, it may create legal obligations and also moral obligations which can weaken your negotiating position.

Don’t enter into a contract by mistake

• A contract doesn’t need to be signed and in writing to be binding – you can enter into a binding contract over the phone or by e-mail provided key terms are agreed.
• To help clarify that you are still in negotiations, mark all correspondence “subject to contract” or “not legally binding”.

More information

DTM Legal provide commercial legal solutions for businesses. If you have any questions about the content of this article, please contact Edward Barnes on 01244 354800 or at edward.barnes@dtmlegal.com.

Edward Barnes, Head of Corporate at DTM provides some helpful advice in this article on what is in a brand and how to protect it.

A strong brand helps distinguish your products from your competitors’. It adds value to your business by enhancing consumer awareness and improving customer loyalty. A brand can be made up of many elements, including:

• A logo (Nike swish).
• A word (Kodak).
• A colour (Virgin red).
• A shape (Coca-Cola bottle).
• A strap line or jingle (The future’s bright, the future’s Orange).
• A domain name (Amazon.com).
• A person’s name (David Beckham).

A strong brand can be a very valuable commercial asset. According to a recent survey the top three global brands by value were:

• Coca-Cola (worth $68,734 million).
• IBM (worth $60,211 million).
• Microsoft (worth $56,647 million).

In recent years we have some unknown brands shoot up in value, for instance in 2011 the Facebook brand is reported to have experienced a surge in brand value growth of 246%.

 Brands can also be lost or devalued if they are not adequately protected; they can even be destroyed by a single remark. Gerald Ratner, CEO of the jewellery group Ratners, famously described some of his own products as “total ****”. An estimated £500 million was wiped off the value of the group and it eventually had to be completely re-branded as the Signet Group.

Creating and protecting a brand

Many elements of a brand can be protected as so-called intellectual property rights. These are legal rights that apply to creative work and, for example, prevent copying and unauthorised third party use.

Initial considerations

• Make sure you take legal advice early on in the creative process. This will help ensure that whatever you create can be protected and does not infringe other people’s brands or other rights.
• Take great care if you involve third parties, such as brand consultants or advertising agencies, in creating a brand. Make sure that they sign confidentiality agreements and transfer rights in their creative output (such as copyright) to your business.
• Carry out internet searches to check that the brand is not already being used by another business. Instruct a law firm to conduct further searches of the relevant registries if necessary.
• Keep accurate records of the development process and date stamp these documents. This will help you provide evidence if any infringement claim is brought against you. For example, evidence that it was created as part of an original process, rather than copied.

Legal protection

Your business can use legal rights to protect your brand value:

• Copyright applies to original work such as creative or artistic output including a piece of writing, music, photograph, software or video clip. It provides automatic protection to original work against other people copying the work without permission.
• Trade mark rights arise through registration and/or use in a commercial context and can protect brand elements such as logos, slogans and colours.

Registration: why and where?

• Some elements of a brand can get greater protection if they are registered (for example, as a registered trade mark). Applications to register these rights will be tested, among other things, on their merits and against existing third party rights. In the case of trade marks, this includes a consideration of whether the mark is distinctive.
• Registration gives you the exclusive right to use the trade mark as registered and enforce that right against anyone using it without your permission. Unregistered rights are similar but are harder to enforce and therefore protect. For example, for an unregistered trade mark, your business will have to prove that it has the goodwill in the mark, which can be very difficult and expensive to establish.
• Registration makes enforcement a lot easier but it may be costly and time-consuming. Your business will also need to consider whether to register on a national or cross-border basis (for example, across the European Union). The issues are complex, so you should take legal advice beforehand.

Using a brand

Once a brand has been created and protected, it is important that you use it consistently and do nothing that could cause you to lose protection:

• Draw up or review your existing brand guidelines. They should include clear rules on how the brand must be used throughout your business.
• Strictly enforce your brand guidelines internally and externally to build up the brand, its market presence and therefore its value.
• Even minor changes in the way your brand is used (for example, in font or colour) can create a new right that will need to be protected in addition to the rights you already have. Costs of protection (for example registration fees) can quickly mount up if you have lots of different variations of your brand.
• Use copyright notices © and trade mark symbols (™ for an unregistered trade mark and ® for a registered trade mark) where appropriate. They act as an early warning system to would-be infringers and will help your business when seeking to prove that a defendant knew about your right.
• Ensure that registered rights are used. Failure to do so can, in some cases, result in loss of protection.
• Ensure that any renewal fees for registered rights are paid on time, otherwise you risk losing the protection of the registration.
• Check that any brands licensed in from third parties (for example a registered trade mark) are being used in accordance with the terms of that licence.

Exploiting a brand

A brand can be commercially exploited in a number of ways. The main methods are by licence or assignment:

• A licence is an agreement that gives another business the right to use your brand for a defined period in a defined territory. Once the term has ended, ownership and control of the brand returns to your business.
• An assignment is an agreement that sells your brand to another business. You lose control of it but receive a lump sum in return.

Always take legal advice before allowing a third party to use your brand either formally or informally.

• A written agreement governing use of the brand should always be signed if you are considering entering into an agreement with a third party.
• Put guidelines in place governing the use of your brand by others (for example, subsidiaries, franchisees and distributors) and strictly enforce these guidelines. Your business should monitor use and ensure adherence to your brand guidelines.
• Your business can request that a third party obtain your prior written approval for use of your brand.

Enforcing a brand

Your business can lose brand protection if you allow people to use your brand on an unauthorised basis, however minor. Misuse of your business’ brand by others will also weaken its value. Your business must therefore monitor infringement and actively pursue infringers:

• Keep accurate records of permitted third party use of your brands. Monitor use to ensure adherence to the terms of any agreement.
• Have a system in place for reporting unauthorised use of your brand or use of similar marks or brands.
• Make sure everyone understands the importance of reporting any misuse of your business’ brand, even if the use is for different goods or services to your own.
• Take legal advice immediately if your business becomes aware of any misuse of your brand. In many cases, time will be of the essence to prevent damage to your brand and consequential sales losses.

Do not infringe other people’s brands

• Be very careful if you use another company’s brand in any of your marketing. For example, your business should not use somebody else’s logo on your website to make it look like they have endorsed your product.
• Your business can use a competitor’s brands in your own adverts, subject to certain restrictions. For example, if you are comparing them with your own brand you must not insult or denigrate your rival’s brand.
• Take legal advice if your business is considering using a rival brand in any of your advertising, particularly in view of the fact that the law has recently changed in this area.

 More information

If you have any questions about Brand protection and Intellectual Property in general, please contact Edward Barnes

• 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.

2. 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).

3. Liquidated damages 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.

4. 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.

5. 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.

6. 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.

7. 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 Jim Morris

DTM LEGAL  have built on their good relationship with  The Queen’s School by joining up to partner the school on the  Schools Law Web, Anna Duffy, Partner at DTM Legal comments:

“The Schools Law Web Project is a fantastic way to bring teachers and lawyers together to introduce young people to the legal system and those who work within it.  DTM are delighted to be sponsoring The Queen’s School and look forward to working closely with them.” 

The scheme was set up in 2003 and has now catered for 175,000 pupils across the UK.

The Schools Law Web is delivered by teachers but its success is due entirely to the support of our members from the legal community, something the teacher organisers are very grateful for:

“The Queen’s Lower School are delighted that DTM are the sponsors for the Schools Law Web Project.  We have built a close relationship with DTM over the years and this is a great example of how the business and local communities can support each other”  Mrs Y Pearson, PSHE and Citizenship co-ordinator

DTM are very proud to have sponsored the Abbey Gate College Ski Team enabling new ski suits to be purchased. 

The flame red suits provided for all Team members create a highly visible corporate identity for them and at the most recent event  in Flaine they were easily recognisable, even from the bottom of the slopes!

DTM, who offer specialist legal services to the Education Sector, started business in Chester in 2008 winning the ‘Best Business Start Up In Cheshire Award’ the following year and DTM are very keen to support their local community in this way.

Richard Thomas, lead partner for DTM’s Education Sector, commented:

“DTM as a firm are very family orientated with the vast majority of the firm’s people having children of school age and we therefore understand the importance of extra-curricular activities such as this to the development of our children. Whilst DTM predominantly advises businesses and educational establishments on all aspects of commercial law we ensure we never lose sight of where it all starts. We hope Abbey Gate College have many years of use from the ski suits and that they encourage pupils to get out there and have a great time.”

Based in offices adjacent to Chester railway station, DTM sees its role as partnering businesses to provide practical, commercial solutions to their legal problems. Evidence of our ability to deliver on these promises can be found on our testimonials page

It is long established law that the elements required to form a contract are offer, acceptance, consideration (money or otherwise) and an intention to create legal relations. Therefore, a formal written and signed document is not necessary to form a legally binding contract which may govern a relationship of significant consequence. Recent court decisions have highlighted the potential cost of forming a contract through correspondence and subsequently relying on an argument that there was in fact no binding contract in place.

One case in particular dealt with facts that will be familiar to many. The owner of a property was instructing an estate agent to market the property for sale. The agent sent an e-mail with sole and multiple agency terms attached saying that it would be instructed on a multi-agency basis till 31 December 2007, and on a sole agency basis from 1 January 2008. This was considered an offer by the agent. The reply (and acceptance) read, “Hi Mark, that’s fine, look forward to viewings. Sally.” The property was subsequently sold through another agent in 2008 and the original agent claimed over £10,000 in commission. The court of appeal agreed that a sole agency contract had been created by the e-mail exchange. That contract had been breached when another agent was instructed. The court held that the original agent was entitled to damages which were assessed at 100 per cent (i.e. circa £10,000).

The lesson to be learned by this (and many other) cases is that anyone dealing, whether personally or professionally, in negotiating terms of third party relationship should mark correspondence “subject to contract”, and ideally the correspondence (whether e-mail or otherwise) should state expressly that any contract will only be formed by the signature and exchange of whatever separate document is intended to form the contract.

DTM’s Tom Sutcliffe, who heads up the St Helens office, and Julie Mogan with Man of the Match, Lance Hohaia.

The Saints new life at Langtree Park could not have got off to a better start, and the DTM Legal team were proud to be able to play a part in it as match sponsors.

 The first game at the fantastic new stadium must have been a nerve-racking experience for those involved at Saints, from the players to all of the stadium support staff, this was a venture into the unknown but they should be very proud with the result, both on and off the pitch!

 On the pitch, a strong Widnes team made a real match of it and it was only in the second half that the Saints superiority finally told, running out 42-24 winners and retaining the Karalius Cup.

 As match sponsors, the DTM team and guests were treated to corporate hospitality of the highest quality and will be making Friday night Rugby League at Langtree Park a regular fixture! Here’s to a successful season for the Saints.

A new leaflet on VAT has been published by HMRC dealing with ‘extra care’ accommodation.

 This is accommodation which is  as set out by HMRC ‘sold or let with the option for the occupant to purchase varying degrees of care to suit his or her needs as and when they arise’.

 HMRC accepts, regardless of the Use Class, that extra care accommodation is ‘designed as a dwelling’, and therefore its construction and first sale or long lease will be zero rated, if it meets all of the standard conditions, which are as follows:

• the dwelling consists of self-contained living accommodation there is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling
• the separate use of the dwelling is not prohibited by the terms of any covenant, statutory planning consent or similar provision
• the separate disposal of the dwelling is not prohibited by the terms of any covenant, statutory planning consent or similar provision
• statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent

This guidance has been long awaited and will assist those working on and planning sites which involve elements of ‘extra care accommodation’.  HMRC intends to consider other types of accommodation later this year and their VAT treatment.

Specialists at DTM work closely with clients within the care sector including developers, for further information on these services please contact Thomas Pearson.

DTM LEGAL are please to become a contributor to SKILLSHARE.

SKILLSHARE connects local business to the community providing the business with an opportunity to give something back to the community through skills-based volunteering.

SKILLSHARE locally is managed by Chester Voluntary Action who act as the medium between the Business and the Charity.

The benefits to the voluntary and community organisations include the following:

• Access to specialist skills and resources including workshops, best practice guides and one-to-one support
• skills and knowledge transfer from subject matter experts

If you are involved in a voluntary or community organisation locally and want to see if SKILLSHARE can help you, please contact enquiries@chesterva.org.uk