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Updates and Tips

Completion Accounts in acquisitions – what does ‘Accounting policies adopted in the Accounts’ mean? (Accountants out there may be surprised at this)

April 2015 Many share and asset sale deals require a price adjustment to be made based on a set of completion accounts which needs to be drawn up. As everyone knows, a set of accounts will usually tell you what the company and its accountants want to tell you. So it’s important for both sides to set out as clearly as possible in the sale agreement how the completion accounts should be prepared and how any adjustments to the price should be worked out...

Why you shouldn’t lie to your insurer

Dec 2014 Your Latin term for the day is ‘uberrimae fidei’. This vaguely seasonal-sounding expression means ‘utmost good faith’. It’s an implied term in any insurance contract. A recent case is an example of how important it is...

The importance of well-worded exclusion clauses

Dec 2014 The law relating to exclusion and limitation of liability clauses is quite difficult. Many people (including many good lawyers I have known) have been confused by it. One area which causes confusion is that the law says that there are two broad categories of loss which you can seek to recover as damages for breach of contract – direct and indirect losses. But some types of loss, eg physical damage, loss of profit, economic loss, and loss of reputation and goodwill, are capable of falling into either category. Broadly, direct losses are those which are the direct and natural consequences of a breach. Indirect losses (also known as consequential losses) are those that do not arise naturally in the course of events, but are still contemplated by the parties at the time the contract is entered into because of the particular circumstances. This recent case is an example of confused drafting (or possibly of a party trying to wangle a different result from clear drafting…)...

The penalty for seeking a penalty

Dec 2014 You have to be very careful if you want to say in a contract that the other party must pay a pre-determined sum if it doesn’t do what it agreed to. The law says that if this sum is a genuine estimate in advance of the loss you might suffer it will be called ‘liquidated damages’, whereas if it is designed to scare the other party from committing a breach it will be called a ‘penalty’. And under English law a clause which seeks to impose a penalty is unenforceable. The general rule has always been that a court will decide things based on the situation at the time you entered into the contract...

Misrepresentation – something to grouse about

Aug 2014 In this case a Mr Erskine was looking to hire a grouse moor for commercial shooting. The hirer (‘VR’) overstated the number of grouse (or grouses; but not grice). Mr Erskine later set up a separate entity, Cramaso LLP, which entered into the contract. The grouse shortage was discovered and Cramaso sued VR for misrepresentation. Did it succeed, bearing in mind that it didn’t even exist when the representation was made?...

Anti-embarrassment clauses – what is the meaning of the purpose?

Aug 2014 No, really, what is the meaning of ‘the purpose’? This isn’t a deep philosophical question. It is an important question if it appears in an elephant clause in a non-embarrassment agreement, as in this recent case. Does ‘the purpose’ mean the sole purpose? The most important purpose? Any one of the purposes? Or something else?...

Late payment – interested in recovering interest and recovery costs?

Jan 2014 I thought it would be topical (seeing as I have quite a few overdue bills owing to me at the moment) to pen a quick article about the late payment legislation. In particular, did you know that since March 2013 you can recover ‘reasonable costs’ in recovering the debt?..

What comfort is a comfort letter?

Jan 2014 If you are doing business with any company you want to know they’ll be good for their obligations and won’t go bust on you. If you’re dealing with a subsidiary of a large successful company you might be prepared to overlook the subsidiary’s weak-looking financial position (assuming you’ve checked it out in the first place) provided that you are given what is known as a ‘comfort letter’ from the parent company. But are comfort letters worth the paper they’re written on? Shouldn’t you be asking for a proper guarantee instead? Check out this case from last year...

Patent Box: things to think about

Nov 2013 Whilst I promised not to write too much about tax – it’s really not my specialist area – there are one or two things worth thinking about in relation to how you can go about business to take advantage of the new Patent Box regime...