Our Commercial Team provides expert advice on issues such as whether you are able to suspend lawfully your obligations under a contract due to the COVID-19 crisis; steps that can be taken to retain title to goods pending payment; preparing robust Terms and Conditions of Business; and the registration of your Intellectual Property rights.
T's and C's
Trading terms with suppliers and customers have become an essential tool to deal with the complexities of doing business and minimise scope for confusion in how the contract will be performed. It is within such terms that you can provide for what happens if one party simply cannot perform its obligations, for example because of Covid, Brexit or financial difficulties. Such events can sometimes be classed as Force Majeure and as the recent court case on business continuity insurances shows, they need to be very carefully worded in order to maximise their benefit.
Life can prove to be very difficult if you do not record in writing the terms on which you deal with others. In the absence of a written contract, courts will try to construe a contract from correspondence, custom and practice of the trade and an established course of dealings, and their inferences can often be somewhat different to the parties’ original intentions.
Far, far better to have a comprehensive single document setting out all the terms that have been agreed between you and the other party to ensure you maximise the benefits of the relationship whilst simultaneously minimising your risk. In this way, if differences arise between the parties or one of them wants to see how exposed it is to risks caused by events that are outside their control, the chances are that well drawn contracts will provide a method of resolution.
Retaining title of goods
At common law, an unpaid seller still in possession of goods agreed to be sold will have a lien over them. It can retain possession until paid and sell them elsewhere if not paid within any contractual time limit or a reasonable time after the buyer is told the goods are ready and payment is due.
If you have parted with possession, there is no enforceable lien, and the buyer could sell and keep the proceeds. If your customer is what is called a mercantile agent and its sale is part of its normal business, it can pass good title to its own customer. If your customer then becomes insolvent, you are a mere ordinary creditor in any liquidation.
However, it is possible to provide in your contract or terms of business that even after delivery to the buyer, title to the goods remains with the seller until paid. It is also possible to provide that you have rights over the proceeds of any sale by your customer.
In such a case you would need to register those rights at Companies House as a charge against book debts for them to be valid. This registration may put your customer in breach of its banking covenants and ultimately lead to insolvency, so care needs to be taken here.
If your customer has indeed sold the goods you could claim payment of your price, with an uncertain outcome. The solution is to take an advance deposit if you are in any doubt about your customer’s solvency.
Protecting your IP
For many businesses this is their most valuable asset and needs to be protected. This is what distinguishes them from their competition and in many cases can be the sole reason why a business receives a take-over bid.
Copyright does not normally need to be registered to be enforceable except in some other countries. Inventions/patents, designs, trade names and logos can and should be registered in relevant countries to reduce the risk of their being copied and exploited by others. The application needs to be as widely and flexibly drafted as possible to reduce the risk of the competition making minor tweaks and claiming their own intellectual property rights in what was fundamentally your property, whether that’s in the UK, or in the EU, or wider afield.