Monthly commercial law update: Top 5 developments in December

Happy New Year to all of our readers! The team here is looking forward to the challenges that 2014 will doubtless bring although if it involves any more rain we're all going to move to Dubai or, failing that, the Atacama Desert in Chile.

In the meantime, here's this month's round-up of the top 5 most interesting developments in commercial law (as the team here sees it), extracted from our monthly Lexis®PSL Commercial round-up. We also set out any new statutes and statutory instruments that might also be of interest to commercial lawyers and their clients.

Consumer protection: Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 published

Following the Government's consultation about implementing the Consumer Rights Directive earlier in 2013, it has now issued the final Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

The regulations will apply from 13 June 2014 and replace the current distance and doorstep selling legislation.

The key changes from the current legislation are that the current cooling off period will be extended to 14 days and consumers buying digital content will be protected as well as those buying tangible goods and services.

The Government has now included provisions in the regulations implementing rules on delivery and risk, which it originally intended to implement via the Consumer Rights Bill. The Government has already implemented provisions in the Consumer Rights Directive regarding 'above-cost' payment surcharges in the Consumer Rights (Payment Surcharges) Regulations 2012, which came into force on 6 April 2013.

Confidentiality: European Commission proposes rules to help protect against the theft of confidential business information

According to a recent survey, one in five companies has suffered at least one attempt to steal its trade secrets in the last ten years. The 2013/2014 Kroll Global Fraud Report says the numbers are increasing, with 25% of companies reporting theft of information in 2013, up from 18% in 2012.

The European Commission has proposed new rules in the form of a Directive on the protection of undisclosed know-how and business information, ie trade secrets, against their unlawful acquisition, use and disclosure.

There are substantial differences in the laws in place in EU countries on protection against trade secret misappropriation. Some countries have no specific laws on the issue. Businesses find it difficult to understand and access the systems of other Member States and whenever they become victims of misappropriation of confidential know-how, they are reluctant to bring civil court proceedings as they are not sure the confidentiality of their trade secrets will be upheld by the courts.

The current fragmented system has a negative effect on cross-border co-operation between business and research partners and is a key obstacle to using the EU single market as an enabler of innovation and economic growth.

The draft Directive introduces a common definition of trade secrets under Article 2. The Directive also provides a means through which victims of trade secret misappropriation can obtain redress. It aims to make it easier for national courts to deal with the misappropriation of confidential business information, to remove the trade secret infringing products from the market and for victims to receive damages for illegal actions.

The Commission's proposal on the protection against misappropriation of trade secrets will be transmitted to the Council of Ministers and the European Parliament for adoption under the ordinary legislative procedure

Contract law: Court of Appeal considers penalty clauses in share purchase agreement

In the case of Talal El Makdessi v Cavendish Square Holding Limited and another [2013] EWCA Civ 1539 a share purchase agreement contained clauses stating that if there was a breach of the seller's restrictive covenants, the buyer's obligation to pay deferred consideration would cease and the buyer would be entitled to acquire the remainder of the seller's shares at price based on net asset value excluding goodwill.

The Court of Appeal ruled that the provisions were unenforceable penalties. Although the case was in the context of a share purchase agreement, issues of unenforceable penalties frequently arise in the context of commercial agreements. Great care should therefore always be taken when drafting such clauses.

Contract law: High Court considers settlement agreement

The High Court has held in Palmer and Harvey Mclane Ltd v Garrad and another [2013] All ER (D) 55 (dec) [2013] EWHC 3810 (Ch) that a settlement agreement made between the claimant and defendants was valid and enforceable, and that the defendants had failed to establish, to the required standard, that it was sham.

It was settled law that proof of a sham agreement was on a balance of probabilities and the legal burden of proof on the party alleging the sham was a heavy one. Proof of the existence of a dishonest purpose required a strength or cogency of evidence commensurate with the gravity of the allegation. Although the case was decided on the facts, it is a useful illustration of the established law on sham agreements.

Contract law: Obligations of good faith in contracts

We recently reported on the case of Hamsard 3147 Ltd and another v Boots UK Ltd  [2013] EWHC 3251 (Pat), [2013] All ER (D) 12 (Nov), in which the Patents Court, dismissed a claim by a company against Boots seeking damages for the alleged wrongful termination of the supply contract. The period of notice of termination given by Boots had been reasonable and Boots had not been obliged as a matter of ‘good faith’ to order from the company goods that it did not want. Boots had not acted in breach of contract in failing to order a ‘transitional range’ or by disposing of broken stock by giving it to charity following the termination of the contract.

New statutory instruments of interest to commercial lawyers this month:

  • Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013: Contracts between traders and consumers will be subject to more stringent rules on the information required to be provided to consumers and countering hidden costs from 13 June 2014. The changes combine with the draft Consumer Rights Bill for a fundamental reform of UK consumer rights, making more effective markets
  • Defamation Act 2013 (Commencement) (Scotland) Order 2013—A new defence of qualified privilege related to peer-reviewed material in scientific or academic journals, which is contained in the Defamation Act 2013, is brought into operation in Scotland on 1 January 2014
  • Enterprise Act 2002 (Part 8 EU Infringements) Order 2013: Further EU legislation has been added to the list of consumer protection measures which can be enforced using the framework under Enterprise Act 2002, part 8. The Order will have effect from 13 June 2014
  • Financial Services and Market Act 2000 (Designated Consumer Bodies) Order 2013: Four additional bodies can make super-complaints to the Financial Conduct Authority (FCA) from 14 January 2013. The Treasury invited applications on 12 March 2013 from bodies wishing to gain the ability to make super-complaints. Such complaints benefit from a faster system of access to the FCA, with a higher burden on the FCA in relation to their response
  • Food Safety and Hygiene (England) Regulations 2013: As part of the government’s Red Tape Challenge, certain legislation on food hygiene is consolidated from 31 December 2013
  • Postal Services (Universal Postal Service) (Amendment) Order 2013: Amendments to the Postal Services (Universal Postal Service) Order 2012 include amendments to services for blind and partially sighted people, free provision of Certificates of Posting, an end to prohibition of tracking and the setting out of size limits for postal packets, effective from 31 December 2013
  • Public Bodies (Abolition of the National Consumer Council and Transfer of the Office of Fair Trading’s Functions in relation to Estate Agents etc) Order 2014 SI 2014/Draft: The National Consumer Council is abolished and its relevant functions are transferred. In addition certain functions of the Office of Fair Trading are transferred
  • The Small Companies (Micro-Entities' Accounts) Regulations 2013—These regulations, which come into force on 1 December 2013, permit very small companies (those with balance sheet/turnover not exceeding £316,000/£632,000 and having not more than ten employees) to prepare simplified accounts for financial years ending on or after 30 September 2013, as part of the implementation of the EU 'Micros Directive' in the UK
  • Waste Electrical and Electronic Equipment Regulations 2013: Waste electrical and electronic equipment (WEEE) in the UK must now be collected and disposed of in line with EU legislation. Producers of electrical and electronic equipment (EEE) will be financially responsible for managing the waste arising from products they place on the EU market
  • Financial Services and Markets Act 2000 (Designated Consumer Bodies) Order 2013: Four additional bodies can make super-complaints to the Financial Conduct Authority (FCA) from 14 January 2013. The Treasury invited applications on 12 March 2013 from bodies wishing to gain the ability to make super-complaints. Such complaints benefit from a faster system of access to the FCA, with a higher burden on the FCA in relation to their response

Area of Interest