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Archive for the ‘Business Law’ Category

New Consumer Contract Regulations – Do Your Business Practices Comply?

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Paul Trincas

Paul Trincas

The Consumer Contract Regulations came into force on 13 June 2014 and contain a number of pitfalls for unwary traders. Paul Trincas, a litigation specialist with Charles Lucas & Marshall, covers the headline points.

The Consumer Contract Regulations apply to all qualifying contracts made after the 13 June.
They supersede the Distance Selling Regulations and Doorstep Selling Regulations. They regulate ‘on-premises’, ‘off-premises’ contracts and distance selling. Distance selling includes online sales, telesales or sales via a catalogue but is outside the scope of this article.

Q – Will the Regulations apply to my business’ activities?

The Regulations cover contracts for the sale of goods, digital content and / or supply of services where the seller is a trader and the buyer a consumer. Most tradesmen and professional services providers will be caught. Exceptions do apply and these are worth checking.

Q – Why is it important to identify where the contract was made?

The Regulations distinguish between contracts made ‘on’ the trader’s business premises and contracts made elsewhere (e.g. a consumer’s home). Different rules apply to each type of contract. In practice, identifying whether a contract is on- or off-premises can prove difficult: for example, a contract concluded on the business premises of the trader after the consumer has been ‘personally and individually addressed’ by the trader elsewhere might be treated as an off-premises contract.

Q – What is the significance of the contract being ‘on-premises’?

The Regulations require the trader to (1) provide to the consumer certain pre-contract information; (2) seek express prior consent for additional payments; (3) deliver goods within 30 days unless otherwise agreed; and (4) charge the consumer no more than the basic rate for any telephone calls about the contract.

Q – What is the significance of the contract being ‘off-premises’?

The requirements detailed above still apply and in addition (1) the trader must provide the consumer with a copy of the contract; (2) in some cases, the consumer will have a right to cancel and must be told as much; (3) if applicable, the trader must not begin the service before the end of the cancellation period unless requested to do so.

Q – How does the right to cancel work?

The cancellation period begins either the day after the consumer has received the goods or (if a services contract), from the date on which the contract is entered into. The cancellation period ends after a period of 14 days from the date on which the consumer is given the pre-contract information (up to a period of 12 months from the last day of the ‘normal cancellation period’). A consumer can cancel by making an unequivocal statement to the trader to that effect. If the consumer cancels, no contract is formed and the consumer will be entitled to reimbursement of monies paid.

Q – Is there any way of overcoming the cancellation period?

In relation to services contracts, the consumer can make a written request that the services begin during the cancellation period. If the consumer has done so, he must pay for so much of the services as have been performed up to cancellation provided certain conditions are met. In practice, the trader is advised to provide the consumer with a carefully drafted ‘instructions to proceed’ form for completion.

Q – There appears to be a number of traps for the unwary trader!

Indeed there are! Failure to provide the consumer with the pre-contract information will mean that the trader is in breach of an implied term of the contract. In relation to off-premises service contracts, the consumer might escape payment altogether by exercising cancellation rights within 12 months of the normal cancellation period, despite the services having been provided. Failure to provide the pre-contract information in relation to off-premises contract is also a criminal offence.

For further information contact Paul Trincas on 01635 521212 or paul.trincas@clmlaw.co.uk

Written by Paul Trincas

October 21st, 2014 at 10:00 am

Misleading Statements From Directors – Actions Available to Shareholders

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When directors have made misleading statements there are a number of potential penalties and remedies available to minority shareholders. Rupert Wright, a corporate lawyer with Charles Lucas & Marshall explains.

Rupert Wright

Rupert Wright

Misleading statements by directors mainly relate to information and projections which are presented to investors which are false or misleading and which never had any hope of ever being fulfilled.

There are a number of options for redress by shareholders – whether under criminal law, common law or under the Companies Act 2006.

The first consideration in any potential criminal prosecution is the Code for Crown Prosecutors.  Any prosecution must comply with the evidential stage and the public interest stage.  A person is only charged with allegations of crime where both tests are met.  Potential criminal offences might include misleading statements in relation to investments, fraud by false representation, fraud by abuse of position and conspiracy to defraud.

Under Section 397 of the Financial Services and Markets Act 2000, there are three elements which the prosecution must prove to make out an offence: namely that a misleading statement was made, that there was a requisite state of mind and also that the defendant must have acted with the purpose of inducing any person to act or refrain from acting in a way specified or was reckless.  The maximum sentence for an offence contrary to Section 397 is seven years in prison although this would be reserved for the worst cases of its kind.

As well as a criminal claim, there are potential civil remedies for making a misleading statement.  In the case of a civil claim, the following matters need consideration: deceit, conspiracy, dishonest assistance, breach of fiduciary duties, unjust enrichment and knowing receipt.

The Companies Act lays down the various fiduciary duties for directors.  In particular, a director must act within its powers, promote the success of the company, exercise reasonable skill, care and diligence and avoid conflicts of interest.

It is also open to minority shareholders to make a derivative claim which applies where shareholders have suffered or may suffer damage to their shareholding as a result of the conduct of a director.  A derivative claim is an action commenced by a shareholder seeking relief on behalf of the company in respect of wrong done to the company.  It is also open to members to make an unfair prejudice claim under Sections 994 to 999 of the Companies Act 2006.  A claim under this section can be made where the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members.

In summary, there are a number of avenues open to shareholders to make a claim where misleading statements have been made by directors.  Directors can potentially face a wide ambit of potential criminal and civil claims and should consult their lawyers on a regular basis before making statements which could be potentially misleading.

For further information contact Rupert Wright on 01635 521212 or rupert.wright@clmlaw.co.uk

Written by Rupert Wright

August 25th, 2014 at 3:31 pm

Corporate Hospitality – Making Clients Offers They Might Refuse

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The usual summer season of corporate hospitality sporting events is in full swing. Rupert Wright, a corporate services lawyer with Charles Lucas & Marshall, explains why legislation may be prompting some companies to think twice about accepting an invitation.

Rupert Wright

Rupert Wright

As well as Ascot, Wimbledon and Henley, the season of corporate entertainment has a major addition this year with the London Olympics. For companies looking to build relations with clients and suppliers in an effort to retain or secure new business, these events can present useful opportunities.

However, the introduction of the Bribery Act 2010 (the ‘Act’) in July last year has meant that companies which offer corporate entertainment to their clients now have additional factors to consider.

The Act contains an offence which is relevant to provision of corporate hospitality by companies, namely that of offering a bribe to an individual in the private sector, or to a UK public official.

The bribery offence applies in two cases: first, where a person intends the advantage to bring about improper performance by another or to reward such improper performance. Second, where a person knows or believes that the acceptance of the advantage offered or promised, itself, constitutes the improper performance of a relevant function or activity.

The law refers to the provision of a ‘financial or other advantage’; a gift or an invitation to a sporting event could, potentially, be caught by both of these categories.

The Ministry of Justice has provided a guidance note on the Act. It recognises the important role that hospitality plays in business and states that there is no wish to criminalise such behaviour.

The difference between legitimate corporate hospitality which is lawful and an unlawful attempt to bribe someone lies in the intention of the provider/giver to influence and secure a business advantage. The intention of a person is judged by what a reasonable person in the UK thought.

The guidance note states that the ‘more lavish the hospitality or the higher the expenditure…the greater the inference that is intended to influence a business advantage in return’. In its view, an invitation to foreign clients to attend a Six Nations fixture at Twickenham as part of a company’s PR programme and targeting its clients would be extremely unlikely to constitute an offence under the Act. This is because there is unlikely to be the required evidence of an intention to induce ‘improper performance’.

So, hospitality which is reasonable and proportionate to what is generally accepted as normal by an industry sector and achieves a ‘legitimate business purpose’ is therefore unlikely to fall foul of the Act.

New laws often bring uncertainty for those affected by them – notwithstanding the comforting words of the Ministry’s guidance note. It might therefore not surprise you to hear that some companies have erred on the side of caution by trimming hospitality packages – and have found some clients who are now reluctant to accept offers of hospitality they would previously have taken up without further thought.

For further information contact Rupert Wright on 01635 521212 or rupert.wright@clmlaw.co.uk

Written by Rupert Wright

June 26th, 2012 at 10:16 am