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  • Difference between a Comfort Letter and a Guarantee Apr 28, 2015

    Comfort letters (also called letters of awareness, letters of support, letters of responsibility and letters of patronage) are a hybrid between a guarantee and making no commitments at all. Comfort letters are often given by a parent company to a lender in relation to a credit facility being granted by the lender to the parent’s subsidiary. They are usually used where the issuer is unable or unwilling to give a guarantee, but wishes to give some comfort to the lender. The purpose is to give some comfort to the recipient of the letter by specifying certain moral or legal consequences or commitments. There are several circumstances where the issuer of a comfort letter is unable to give a full guarantee, for example where there are restrictions in its constitution or in other contracts, or because of regulatory grounds.

    Comfort Letters can either be legally binding or non-legally binding. Whether the comfort letter is intended to be legally binding or not depends on its wording; specific terminology used in the letter determines whether the assurance given constitutes a binding contract or only a moral obligation. Thus the wording used in a comfort letter may mean that it is equivalent to a legally binding guarantee, or it may have no legal effect at all.

    Differences Between a Comfort Letter and a Guarantee

    Under a guarantee, the guarantor undertakes to pay to the third party the amounts which the guaranteed party fails to pay. Guarantees normally operate within a clear legal framework, setting out the rights and obligations which attach to them.

    The issuer and receiver of a comfort letter may have rights and obligations which are tantamount to a guarantee but this will depend on the exact wording, the surrounding circumstances and intentions of the parties.

    In the case of a straight guarantee, the guarantor who has paid the creditor of a subsidiary has, by law, an automatic claim against the subsidiary. On the other hand under a letter of comfort the issuer of the letter does not have an automatic claim.

    As mentioned above the wording, the circumstances leading up to the grant of the letter and the parties’ intentions can all affect whether the letter is legally binding or not. However it’s important to note that every comfort letter, evennon-binding comfort letters, will give rise to some degree of legal responsibility, as it will contain at least representations as to present fact. If those representations are false, the giver of the letter may be liable on the grounds of deceit or negligent mis-statement.

    It is therefore essential that the party giving the comfort letter should be satisfied that the statements in it are true as at the date when given.

    The Legal Stop provides fixed fee legal services and legal and business document templates for all types and sizes of businesses. Our services include:

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  • Restrictive Covenants in Employment Contracts Apr 28, 2014

    The law provides protection to employers against competitive activities of employees and ex-employees by the use of confidentiality clauses and restrictive covenants in employment contracts.

    Confidentiality During Employment

    During employment, an employee is under a number of implied obligations to their employer, including an implied duty of confidentiality and implied duties of trust and confidence and good faith. The former means that the employee is under an obligation not to disclose to unauthorised third parties their employer’s confidential information and trade secrets obtained during the course of employment.

    However, in cases where employees have access to confidential information, it is always advisable to insert an express confidentiality/non-disclosure clause into the employee’s contract of employment which makes it clear that they must not reveal such information during employment. Such a clause can usefully define the information that the employer classes as confidential. Employers are able to discipline employees for disclosing confidential information during employment and the case will be strengthened where there is an express clause that has been breached.

    Confidentiality After Employment

    When an employee leaves employment, they are generally free to use the skills, training and knowledge gained during their employment. However, employers are entitled to protect their information which can properly be classed as a trade secret or information which, while not properly described as a trade secret, is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret. Unfortunately, there is no generally accepted definition of what information amounts to a trade secret. Essentially, it is likely to constitute information which, if disclosed to a competitor, would be liable to cause significant damage to the employer’s business. Each case will turn on its own facts but it may include: secret manufacturing processes, chemical formulae, designs or special methods of construction, customer lists and confidential price lists. In determining whether information is a trade secret, the court will have regard to the nature of the employment, the nature of the information, whether the employer impressed on the employee the confidentiality of the information and whether the relevant information can easily be isolated from other information which the ex-employee was free to use or disclose.

    Employers who wish to protect themselves should ensure that employees are subject to an express post-termination confidentiality/non-disclosure clause preventing disclosure of trade secrets and highly confidential information when employment ends. It is always better to have an express clause than to rely on an implied duty.

    Enforcing Confidentiality Clauses

    It is normally easier to enforce a restrictive covenant than to enforce an express or implied obligation of confidentiality post-termination of employment. Restrictive covenants give certainty whereas the line between information which is confidential and information which is not is hard to draw. However, if there are no express post-termination restrictive covenants, they cannot be implied and the employer will then have to rely on express/implied obligations of confidentiality.

    The courts may enforce confidentiality clauses by the use of injunctions and search orders/orders for delivery up.

    Springboard injunction:
    an injunction may be obtained as a means of protecting the employer against the competitive activities of ex-employees who have wrongfully used confidential information, for example, a customer list obtained during employment. It is used to prevent the ex-employee from taking an unfair advantage of the springboard they have gained by the misuse of the confidential information. Essentially, the ex-employee is not allowed to use information in confidence as a springboard for activities detrimental to the owner of that information. If an injunction is granted, it should not normally extend beyond the period for which the unfair advantage may reasonably be expected to continue.
    Search order/delivery-up order: a search order is used in cases where the employer believes that confidential documents or documents containing trade secrets have been taken and the employee will destroy those documents if they become aware of legal proceedings. A delivery-up order orders delivery up of documents or other property belonging to the employer.
    Account of profits: the employer could alternatively try to seek an account of profits for breach of confidence i.e. all profits the employee has made due to the breach. There is no requirement to mitigate.
    Damages for breach of contract: an employer is entitled to sue an employee who has acted in breach of contract for any direct and actual losses incurred as a result of the breach of confidentiality complained of.

    Restrictive Covenants

    One of the most effective means of protecting a business from competition is to ensure that employees are bound by enforceable post-termination restrictive covenants. Restrictive covenants in the context of employment contracts are covenants placing restrictions on an employee’s activities once employment has ended. They need to be express: they cannot be implied. Such clauses will only be upheld against the employee to the extent that they are reasonably required for the protection of the employer’s legitimate business interests. A restrictive covenant will not be enforced if its sole purpose is to prevent the employee from competing with their ex-employer or from using the skills, experience and knowledge acquired during their employment. For the covenant to be enforceable, it is essential that three conditions are fulfilled:
    1. It protects a legitimate business interest – an employer has a legitimate interest in (a) its trade secrets and confidential information, (b) its trade/customer connections or goodwill, and (c) protecting the stability of its workforce. There is no requirement to identify the legitimate interest in the covenant itself but where the covenant does identify the legitimate interest, the employer is stuck with having to rely on that interest and cannot rely on a different on a different one.
    2. It is drafted no wider in scope than is reasonably necessary for the protection of that business interest.
    3. It is not otherwise contrary to the public interest.
    Employers should make sure that the restrictive covenant actually forms part of the employee’s contract of employment and that the employee is made aware of it before they accept the job. If an employer tries to impose a restrictive covenant unilaterally at a later date (i.e. without the employee’s express consent), this is likely to constitute a fundamental breach of contract enabling the employee to resign and claim constructive dismissal. An employee can generally claim constructive dismissal if they have been employed for two years or more where their employment commenced on or after 6 April 2012, or one year or more where their employment commenced on or before 5 April 2012.

    However, it may be possible for an employer to insist on an employee accepting a restrictive covenant when it comes under a competitive threat and then to fairly dismiss the employee on SOSR (some other substantial reason) grounds if they refuse. It will depend on whether the employer acted reasonably or unreasonably in treating that reason as sufficient to dismiss the employee.
    Types of Restrictive Covenant
    There are four main types of restrictive covenant:
    1. Working for a competitor, or carrying on a competing business on the employee’s own behalf (non-compete covenants).
    2. The soliciting of the employer’s clients or customers (non-solicitation covenants).
    3. Dealing with the employer’s clients or customers (non-dealing covenants).
    4. The soliciting of the employer’s other employees (non-enticement covenants).
    Modes of Restriction
    Restrictive covenants may place restrictions on:
    1. Area: covenants of this kind restrict an employee from competing in a geographical area where the employer has legitimate business interests.
    2. Scope: restrictive covenants of this nature must be carefully defined with regard to the business interests of the employer which they seek to protect. So, for example, an employer will not be allowed to enforce a restrictive covenant attempting to prevent a business activity which is wider than the activities the employer’s business would normally be involved in.
    3. Time: restrictive covenants must be reasonable in relation to the length of time for which they restrict competition. A clause not limited in time is likely to be unenforceable.
    Non-compete covenants: covenants which restrain employees from working for a rival company, or working for the former employer’s clients or customers, or setting up a rival business in competition, after they have left the employer’s employment are known as non- compete covenants. These are the most difficult to enforce as they are the most restrictive/draconian. The only way such covenants may be acceptable is in a case where the covenant limits the ability of the ex-employee to carry out certain prohibited activities in a specified geographical area for a limited duration of time (usually six months). Sometimes, it may be better to refer to specific named competitors rather than a geographical area. In cases where the employer’s legitimate business interest can be adequately protected by another lesser form of covenant (such as a non-solicitation covenant), the court will not uphold a non-compete covenant. As far as prohibited business activities are concerned, employers should define these as closely as possible. For example, if an employee goes to work for a competitor but in an entirely different role which presents no risk to the employer’s legitimate business interests, they should not be restrained. It is common to limit the area of business to the specific business activities in which the employee was personally involved when working for the employer. The key factors here are therefore: duration, geographic area and prohibited business activity.
    Non-solicitation covenants: this type of covenant prevents an employee from soliciting, canvassing or accepting any work from the former employer’s existing customers or clients for a period of time (usually six months). Such a covenant will be enforceable if it is necessary to prevent the employee from using their personal influence over their former employer’s customers or clients, and the knowledge of their requirements, which they acquired during the course of their employment, to entice them away from their former employer. The covenant should preferably only include those customers or clients with whom the employee actually had personal dealings (or specific knowledge of) in a defined time period prior to the termination of their employment (usually 12 months). The key factors here are therefore: duration, definition of the client/customer/supplier and prohibited business activity.
    Non-dealing covenants: covenants of this nature prohibit employees from having any dealings with their former employer’s customers or clients for a period of time (usually six months). It prevents ex-employees from responding to customers and clients who approach them unsolicited, as well as restraining ex-employees from dealing with the customers and clients who they approach. Again, the covenant should only include those customers or clients with whom the employee actually had personal dealings (or specific knowledge of) in a defined time period prior to the termination of their employment (usually 12 months). The key factors here are again: duration, definition of the client/customer/supplier and prohibited business activity. A non-dealing covenant is more onerous than a non-solicitation covenant (as it prohibits dealings even if the client approached the ex-employee) and hence is harder to justify – but easier to enforce because they are easier to prove on the facts.
    Non-enticement covenants: this type of covenant prevents the ex-employee from enticing away their former employer’s other employees for a period of time (usually six months). However, it should not cover all employees. Such a covenant should specifically refer to the seniority or knowledge and experience of particular employees and ensure that employees who join after termination of the employee’s employment are not covered. The key factors here are therefore: duration, definition of the staff and prohibited business activity.

    Breach of Contract and Restrictive Covenants

    If an employer dismisses an employee wrongfully (in breach of contract), or otherwise commits a repudiatory breach of contract, normally he will be prevented from enforcing any restrictive covenants in the ex-employee’s contract of employment. To partly deal with this, employers should consider inserting a clause entitling them to terminate the contract by making a payment in lieu of notice where the contract also contains restrictive covenants. However, be aware that a PILON (pay in lieu of notice) clause in the contract will generally make this payment taxable as earnings. If an employee is dismissed for gross misconduct but the misconduct was not gross, this will not only be an unfair dismissal but also a wrongful dismissal, again enabling the employee to get out of the restrictive covenants. Employers therefore need to be particularly careful when dismissing employees for their competitive activities during employment. An employee can generally make a claim for unfair dismissal if they have been employed for two years or more where their employment commenced on or after 6 April 2012, or one year or more where their employment commenced on or before 5 April 2012. The same principle would apply where the employee resigns alleging constructive dismissal on the basis of fundamental breach of contract/breach of the employer’s duty of trust and confidence: some employees may purport to do this to avoid having to be bound by their post-termination restrictive covenants.
    Enforcement and Remedies
    an interlocutory or interim prohibitory injunction may be used as a temporary order restraining the employee from acting in contravention of their contract of employment, pending the full trial of the action. In this case, the employer would have to provide evidence to support the allegation that the employee is or is about to act in breach of their post-termination covenants. It is only in exceptional circumstances that an ex parte injunction (i.e. without notice to the other side) will be granted. Normally, an injunction is sought on notice to the other side. There is generally no need for the employer to prove damage/loss (except in exceptional cases). The court will decide whether, as a matter of discretion, an injunction should be granted. For example, they will look at the amount of time left to run on the covenant, any delay in enforcement (and the reasons for it), the likely utility of an injunction and whether the employer could be adequately compensated by readily calculated damages or an account of profits.
    Damages: the employer is entitled to sue an employee who has acted in breach of contract for any direct losses incurred as a result of the breach complained of. The financial loss to the employer’s business must be quantifiable. Since it is often difficult to prove that a victim of unlawful competition has suffered financial loss, damages calculated on the traditional compensatory basis may be nominal.
    Account of profits: the employer could alternatively try to seek an account of profits for breach of confidentiality or fiduciary duty i.e. all profits the employee has made due to the breach. There is no requirement to mitigate.
    Claims against the new employer: an employer whose ex-employee has disclosed or is threatening to disclose confidential information to a competitor, or who has entered or is threatening to enter the employment of that competitor in breach of a restrictive covenant, may be able to bring a claim against the competitor himself, even though the competitor was not a party to the original contract.

    Please note that proceedings in relation to the enforcement or breach of restrictive covenants must be brought in the County or High Court and not in the Employment Tribunal. This is because most disputes in relation to the enforcement or breach of such covenants fall outside the jurisdiction of the Employment Tribunal.

    Restrictive covenants and garden leave
    An employer may restrict or deny an employee who has resigned and is working out their notice period access to confidential information and/or customers, suppliers and clients by placing the employee on ‘garden leave’. A garden leave clause has the effect of requiring an employee to serve their period of notice at home. During the period of garden leave, the employee would be entitled to their full salary and benefits, while at the same time they must not work for anyone else and they continue to owe obligations of good faith and confidentiality. The aim of the employer in imposing garden leave is to maintain the employee’s fidelity whilst at the same time ensuring the employee does not maintain his contacts with the employer’s customers, suppliers, clients and confidential information. For garden leave to be enforced, there must be an express clause included in the employee’s contract of employment. Otherwise, putting an employee on garden leave could be in repudiatory breach of the right to work – and may invalidate any restrictive covenants.
  • FREE Commercial Property Law Webinar with Q&A Feb 2, 2014

    The Legal Stop is proud to host this FREE Commercial Property Law Webinar with Q&A

    The Webinar will provide attendees with the most up-to-date information about Commercial Property Law, covering the following topics:







    Our Commercial Property Law Webinar is broadcast live which allows you to interact with our expert speaker, asking the questions that concern you most.

    The Webinar will take place on Wednesday 19th February 2014 at 1 pm UK time (which is 5am PST). The Webinar is totally FREE and you can register here

    This Webinar is hosted by The Legal Stop together with Property Law Solicitor Jasmin Crilly

    Jasmin founded Kinnaird Sherington Solicitors a specialised property litigation practice in 2013. She gained her relevant experience working in property development and large London Firms where her typical clients were large retail companies. She regularly acts for small to medium sized property developers, landlords, tenants, and property management companies.

    This article provides a brief outline of the legal background when selling goods and services through a website.

    When selling through a website it is important to have terms and conditions in place. The relevant terms must be set out in writing as an online contract will be as enforceable as any other type of contract.

    If you sell goods to consumers through a website, it is important to be aware of the following regulations:

    The Sale of Goods Act 1979 – This Act states that goods that are sold must be as described and of satisfactory quality.

    If consumers discover that products do not meet these requirements they can reject them and ask for their money back providing they do so quickly. Alternatively, they can request a repair or replacement or claim compensation.

    The Sale of Goods Act has been amended by the Sale and Supply of Goods to Consumers Regulations 2002.

    The Consumer Protection (Distance Selling) Regulations 2000 – Distance Selling Regulations give protection to consumers who shop by phone, mail order, via the Internet or digital TV. The protection includes:

    - The right to receive clear information about goods and services (including information about the arrangements for delivery of the product and information about the seller) before deciding to buy;

    - Confirmation of this information in writing;

    - A cooling off period of seven working days in which the consumer can withdraw from the contract;

    - Protection from credit card fraud.

    The Unfair Terms in Consumer Contracts Regulations 1999 – prevents sellers from enforcing terms in a contract which are contrary to the requirement of good faith and which causes a significant imbalance in the rights and obligations of the parties to the detriment of the consumer. Sellers must also ensure that they use clear and plain language when drafting because transparency is an important part of fairness.

    These regulations provide significant protection to consumers and so must be adhered to very carefully by sellers. If a term is unfair, it will not be binding on the consumer. If an unfair term excludes or limits liability for unsatisfactory goods or poor workmanship, the consumer can sue for compensation regardless of it. If an unfair term is unenforceable, the rest of the contract may still be valid (unless it is unworkable without the unfair term).

    Assessment of fairness takes into account the nature of the goods or services, all the circumstances relating to the conclusion of the contract and the effect of other terms in the contract or another dependent contract. This means that a term considered fair in one agreement is not necessarily fair in another.

    Consumers should have the opportunity to read all the terms and conditions before agreeing to the contract. Therefore, you should ensure that the terms and conditions are clearly accessible on the website.

    The Data Protection Act 1998 – The purpose of the Act is to protect the rights of the individual about whom data is obtained, stored, processed or supplied rather than those of the people or organisations who control and use personal data. The Act applies to both computerised and paper records depending on the type of filing system.

    If you wish to pass on individuals’ details to other organisations or wish to contact them about promotions in the future, you must obtain their consent to this. Provisions of this kind may be acceptable where there is a free choice to agree to them or not, for instance, via an option separate from the rest of the contract. But note that fairness is much more likely if consumers have positively to “opt in”. A chance to “opt out” in small print may be missed or misunderstood. In any case the chances of fairness will be increased if the significance of the choice is indicated and drawn to the consumer’s attention.

    The Act requires that appropriate security measures will be taken against unauthorised access to, or alteration, disclosure or destruction of personal data and against accidental loss or destruction of personal data. It is important to ensure that your terms and conditions contain an appropriately worded privacy policy.

    The Electronic Commerce Regulations 2002 – states that when selling online, information must be given in a clear and ambiguous manner about the technical steps to complete a contract, prices must be clearly stated, details must be given about the supplier (in particular, the name and address and registered office address if this is different, e-mail address, the company's registration number, any Trade or Professional Association memberships and the company's VAT number) the fact that any orders must be acknowledged without undue delay and there must be available to the user of the site the ability to identify and correct any errors prior to the placing of their order.

    Excluding liability
    It is not advisable to exclude liability when dealing with consumers. You are never able to exclude liability for faulty goods or death and personal injury. If a consumer makes a mistake when entering details online, s/he should be given a reasonable opportunity to correct the error before they place their order. If you fail to do so, consumers will be entitled to rescind the contract.

    The Legal Stop is a straightforward online business using information technology for the public good. We aim to make the law and provision of legal services more accessible and transparent to people and businesses alike.
    We provide fixed fee legal services and legal and business document templates for all types and sizes of businesses. We offer a wide range of downloadable contract templates and online legal services to businesses, start-ups, and individuals. Our services include:

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  • LAW ON TRADEMARKS Jan 5, 2014

    What is a trade mark?

    A trade mark is a mark, brand or sign used by traders to differentiate their goods from those of other traders. Trademarks can be registered or unregistered.

    Under the Trade Marks Act 1994, any sign which can be represented graphically and which is capable of distinguishing the goods or services of one business from those of another is in principle registrable as a trademark (subject to the absolute and relative grounds for refusal (see below)). Examples of trademarks are: labels, logos, names (including domain names), packaging, smells, sounds, business style and business presentation. Therefore, a trade mark can extend beyond the name of a product or its logo to the colour and shape of the goods. For example, Marmite jar, Coca Cola bottle and colour combinations for drug capsules.

    The name of a person with a possible endorsement right can also be a trademark. However, the name and the image of an individual has to be distinctly linked with the origin of the goods or services in question. For example, Tiger Woods with golf equipment. Therefore, the application to register the image of Diana as a trade mark in connection with various goods such as tea towels failed, likewise so did the application to register Elvis Presley as a trade mark on beauty products.

    In relation to geographical names, it has recently been held that, in general, they cannot be registered as trademarks. However, where a geographical name has come through use to identify the product as being made by a particular undertaking, then the geographical name gains a new significance and can be registered e.g. Waterford crystal.

    Internet domain names (for example: ) can be registered as a trademark provided they are distinctive. Further, it is possible for infringement to occur where the domain address used utilises an already established trademark.

    Exploitation of trade marks

    There are various ways in which a trademark can be exploited:
    • A business may sell its trade mark, for example if it wishes to withdraw from a specific product market.

    • A business may wish to spread the financial return through licensing. Competition law may apply to trademark licensing to control the extent to which a licence holder can be protected from competition from the licensor or its other licence holders.
    UK Registration of trademarks

    Application for registration is made to The Intellectual Property Office (IPO). The application must be accompanied by payment of a fee. Renewal is necessary every 10 years, when a further fee will be required. Alternatively, an application may be made at the European Trade Marks Office.

    An application is filed for goods or services in one or more of the relevant classes of the International Classification. Each class represents a certain type of goods or services. There are 45 different classes for goods and services. Often, it would be advantageous to file in a number of different classes in order to cover the variety of goods or services in which the business proposes to deal. The classes tend to be rather broad and it will normally be necessary to limit the application to specified goods within that class.

    Steps to be taken for registration
    1. File application. You should receive a receipt within 1 week.
    2. Examination and search by the Trade Mark Registry. You should receive a report within 4 weeks, and this may contain the Intellectual Property Office’s objections. If this is the case, you may wish to respond.
    3. Advertisement of the application in the Trade Mark Journal.
    4. Opposition to the trademark would need to be made within 2 months, with the possibility of a 1 month extension.Registration if no opposition is made or if opposition proceedings are decided in favour of the applicant.
    5. Date of registration is back-dated for priority purposes to the date of first filing.If the examiner rejects the application to register the trademark, there is a right of appeal to the High Court.
    Grounds for refusal of registration

    There are 2 types of grounds on which an application to register a trademark can be refused. These are absolute grounds and relative grounds.

    Absolute grounds

    Absolute grounds apply where the sign is, for example, purely descriptive, not distinctive and should otherwise remain available in the public domain. The trademark would be refused registration on the following grounds:
    1. The trade mark lacks distinctive character. That is, if the mark applied for merely describes the goods and services applied for. For example ‘Froot Loops’ was refused on the basis that the name described the product.
    2. The trade mark consists exclusively of signs or indications which are used to describe a particular feature of the goods. The following categories would therefore be considered descriptive:
    • Kind. For example, personal (for computers).
    • Quality. For example, best.
    • Intended purpose.
    • Value. For example, worth their weight in gold.
    • Geographical origin.
    • Time of production or of rendering of services. For example, 24 hour service, eight till late.
    • Other characteristics of the relevant goods or services.
    • Phonetics: misspellings of words that would otherwise be refused will require evidence that the trademark is distinctive.
    3. The trademark consists of signs or indications which are customary in the current language or the established practices of the trade.

    A trade mark should not be refused registration in relation to any of the above grounds, if, before the date of application to register, it has in fact acquired a distinctive character as a result of the use made of it by the applicant.

    4. The trademark consists exclusively of the shape if the shape: results from the nature of the goods themselves; or is necessary to obtain a technical result; or gives substantial value to the goods.

    Goods or packaging created in a specific shape may be registered.

    5. The trademark is contrary to public policy or accepted principles and morality.

    6. The trademark is likely to mislead or deceive the public (for instance, as to the nature, quality or geographical origin of the goods or service). For example, an application to register ‘Swiss Miss’, the name of a chocolate, failed on the ground that it was not made in Switzerland and was not in anyway connected with Switzerland.

    7. The trade mark is prohibited under UK or EC law.

    8. The trade mark is a specially protected emblem e.g. the Olympic symbol.

    9. The application is made in bad faith.

    Relative grounds

    Relative grounds for refusal are concerned with protecting the prior conflicting rights and interests of other trademark owners and the interest of the public in not having similar marks used in relation to the same or similar goods or services. The earlier mark will be protected whether they are registered or not and different rules apply to each situation.

    Where the earlier trade mark is registered

    An application will be refused where there already exists an identical or similar trademark that relates to identical or similar goods and services AND where members of the public are likely to be confused. An application may also be refused on the grounds that, although the goods or services are not similar, the trademark has an established reputation and an applicant for a similar or identical trademark would be taking unfair advantage of, or causing detriment to, that reputation.

    Where the earlier trade mark is not registered

    Even where the earlier trademark is not registered, registration may be refused if it benefits from the reputation of that existing trademark.

    Infringement of a trademark

    Infringement occurs when the trademark is ‘used’ by a person or business other than the owner without their agreement or where the use is based on the above absolute and relative grounds. Therefore, an applicant who tries to register such a trade mark will not only be refused registration but through its use may be sued for infringement. ‘Use’ of a trade mark includes: putting it on goods or packaging; offering, marketing or stocking goods or services under the mark; importing or exporting under the mark; putting it on business papers or advertising material.

    Infringement can also be non-visual such as ‘smell’ or ‘sound’ trademarks.

    Suppliers of the infringing material, such as printers, may be joined in proceedings. For such an action to succeed, the supplier must have known or have reason to believe that use of the mark was not authorised by the owner.

    International Implications

    There are 3 ways of registering trademarks. All applications can be made through the UK Intellectual Property Office (IPO).
    1. Application in the UK for a UK trade mark registration will protect the trademark in the UK ONLY. Conversely, trademarks registered outside the UK will not be protected by that registration in the UK, in the absence of any international agreements to the contrary.Application for a Community trade mark (CTM). This is a unitary right applying in the EU.
    2. Application for a CMT may be made either at the IPO or directly to the Office for the Harmonisation of the Internal Market based in Spain. There is an additional handling charge for CTM applications dealt with by the IPO. Registration will extend to all EU countries and is cheaper than applying for national rights in every country. It is important to note that CTM regulations do not replace national trademark laws, but offer an alternative system of registration. Registration is renewable every 10 years. The main disadvantage of a CTM is that if it is successfully opposed in one of the EU countries, the application will fail in all. The only way around this will then be to convert it to individual trademark applications in each country, which means additional fees to be paid, on top of the CTM registration fees already paid.
    3. Application for an international trademark registration, under the Madrid Agreement. It introduces a single international application, which permits the registration of a mark in more than one country, as if the application was made to each individual country.
    An application can be made by an owner of a trade mark (application or registration) in one of the member countries of the Madrid Protocol, who is also one of the following:
    • a national of a member country of the Protocol;
    • a resident of a member country of the Protocol; or
    • a person or organisation with business premises (legally, ‘a real and effective industrial or commercial establishment’) in one of the member countries of the Protocol.
    Because the UK is a member of only the Madrid Protocol (and not the Madrid Agreement), you can protect your mark only in countries which are also members of the Protocol.

    The application is made to the IPO, who then present the application to the International Bureau of the World Intellectual Property Office (WIPO) in Geneva, which in turn notifies each designated Contracting Party. Each notified country has between 12 to 18 months to oppose registration, after which registration will automatically take effect, and the mark will be protected as if the mark had been registered as a national trade mark (Madrid Protocol, Art.4(1)(a)). The initial duration is for 10 years, renewable for 10 years thereafter.

    What should I do if I believe that a domain name which I have registered as a trademark has been infringed?

    Nominet UK is the Registry for .uk Internet domain names, and provides a dispute resolution service for .uk domain names.

    The majority of disputes relating to domain names are brought under Uniform Dispute Resolution Policy (UDRP). The UDRP is used widely to deal with what is known as cybersquatting (deliberate, bad faith, abusive registration of domain names in violation of others’ rights – particularly trademarks). The complaints are usually brought by the holder of a registered trademark which is identical or very similar to the domain name in question. Generally the complainant must prove the following to succeed in a complaint:

    • that the domain name is identical or confusingly similar to a trademark in which the complainant has rights;t
    • he respondent holder has no rights or legitimate interests in respect of the domain name; and
    • the domain name has been registered and is being used in bad faith.
    Under the policy, complaints are examined by independent panels and if the panel concludes that the complaint satisfies the requirements specified in the policy, it directs that the domain name should be cancelled or transferred to the complainant. If not, the complaint is rejected.


    There are various remedies available to the owner of a trademark where a trademark right has been infringed. Sometimes, commercial advantage can be gained by the owner on selling or licensing the trademark to the infringer. Where such agreement between the parties is not possible, the following remedies are typically available:
    • Injunction (a restraining order to immediately stop the infringing act).
    • Damages (a monetary claim for financial compensation).
    • Account of profits (this allows the injured party to claim the profits made by the party who is in breach).
    • Delivery up and destruction (the right to both seize goods and have handed over the infringing material or goods).
    • A declaration that the trade mark is valid and has been infringed.
    • Criminal penalties (enforcement being carried out by the Office of Fair Trading with the maximum penalties being 10 years imprisonment and/or a fine).
    The usual way to begin would be for solicitors to draft a letter on behalf of the client demanding an undertaking that infringement cease immediately, threatening legal action, usually by way of injunction, and claiming damages or account of profits. However, such a letter should be carefully drafted as the law does provide that where the threat of litigation is groundless, the aggrieved person may be able to bring a civil action for damages on the basis of the groundless threat. A threat would be groundless where the acts concerned would not in fact be an infringement of a valid right.

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  • Law On Apprentices Nov 26, 2013

    This article outlines the law relating to apprentices.

    A contract of apprenticeship is different from a contract of employment and is subject to special rules. A contract of apprenticeship involves an undertaking on the part of the employer to educate and train the apprentice in the practical and other skills needed to practise a skilled trade or profession and to maintain the apprentice until their training has been completed. In return, the apprentice agrees to attend work, serve the employer and learn from them. The primary purpose of the contract of apprenticeship is training and teaching, to enable the apprentice to secure the required qualification.

    A contract of apprenticeship must also be for a fixed term (either for a specified period of time or until the apprentice reaches the required standard of qualification) and it must be in writing and be signed by both parties. The written contract of apprenticeship should ordinarily specify the rights and obligations of both the employer and the apprentice, what training is to be provided and to what level, the length of the apprenticeship and the rates of pay.

    A contract of apprenticeship falls within the statutory definition of ‘contract of employment’ set out in the Employment Rights Act 1996. This means that apprentices are entitled to the full range of employment rights currently applicable to employees. However, they also have additional rights and protections by virtue of the nature of their particular contracts.

    Apprentices who are 16 or over but under 19 years of age and apprentices who are aged 19 or over but in the first 12 months of their apprenticeship are entitled to an apprentice National Minimum Wage (NMW) of £2.68 per hour (this is the rate applicable for the current year 2013). Apprentices who are aged 19 or over and who have completed the first year of their apprenticeship must be paid at least the NMW. Subject to NMW rates, the amount paid to apprentices is, as a general rule, up to the employer. Employers can receive financial assistance towards the cost of the apprentice’s external training from the National Apprenticeship Service.

    As a contract of apprenticeship is for a fixed term to enable the apprentice to receive training and obtain qualifications in order to obtain better employment, it cannot lawfully be terminated before the expiry of that fixed term, except in exceptional circumstances.
    If the employer terminates the agreement early, thereby depriving the apprentice of the training, the apprentice is entitled to claim damages for wrongful dismissal under the contract for the remainder of the fixed-term apprenticeship and also damages for future loss of earnings and prospects as a qualified person. This is still the case even if the apprentice is a poor performer or is having difficulty passing any necessary exams or if he or she has a conduct problem such as poor timekeeping or a poor attendance record. Even a genuine redundancy situation, such as a downturn in work, would not entitle the employer to dismiss the apprentice early, regardless of length of service.
    The employer can still discipline an apprentice for misconduct or poor performance but the apprentice cannot be dismissed, except in exceptional circumstances. A contract of apprenticeship can probably only be brought to an end either by some frustrating event or by a repudiatory act on the part of the apprentice.

    When the fixed term comes to an end the contract of apprenticeship terminates, however the apprentice can bring a claim for unfair dismissal if he or she has sufficient continuity of employment. Therefore it is paramount for the employer to show a fair reason for dismissal and also follow a fair dismissal procedure in the period prior to the expiry of the fixed term. The employer will need to be able to demonstrate that there were no other suitable alternative vacancies available for the apprentice once the apprenticeship had been completed.

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  • New services including fixed fee court representation Oct 16, 2013

    At The Legal Stop our aim is to make the law and the provision of legal services both more affordable and more accessible to both individuals and businesses. To many people the whole legal field is opaque and those on the outside often find it intimidating and bewildering. We intend to change that and ensure that you can secure straightforward advice and access to legal documents that will allow you to act with confidence.

    The Legal Stop is proud to introduce several new services that will offer individuals and businesses affordable legal services. These are:

    • Fixed Fee Legal Advice
    • Fixed Fee Bespoke Document Drafting
    • Fixed Fee Court Representation
    We have partnered with a select number of law firms and barristers’ chambers to provide access to legal services on a transparent and affordable fixed fee basis. Most legal firms charge on an hourly basis and this means that costs can quickly add up, making an already stressful situation worse. We have seen the need for providing quality, affordable advice and can ensure that qualified solicitors and barristers are on hand to provide the professional expertise that you need. This includes fixed fee court representation so that for a one-off fixed fee you can have a barrister representing you in the County Court to deal with matters such as possession hearings, charging orders or enforcement hearings. We can also help with case management conferences, applications to set aside default judgements and arbitration hearings. This means you will have peace of mind knowing that costs are transparent right from the start and you can proceed without the worry of how you will deal with a situation of rapidly escalating fees.

    In addition to our newly launched offering The Legal Stop will continue to provide the same great professional service in the areas of:

    • Legal and Business Document Templates
    • Request a Template Service
    • Free Legal Documents and Information
    We have a portfolio of over 300 legal document templates online and available for download. All of our document templates are professionally drafted, legally binding and subject to the jurisdiction of the courts of England and Wales. They are also regularly updated to comply with any changes to the law. Our templates are written in plain English and easily understandable, so you can avoid the jargon that is commonplace elsewhere. Our documents are also bespoke and tailored to your individual circumstances.
    Because our templates are fully compliant with English law they avoid a lot of the uncertainty about creating the sort of contracts and agreements that everyday life requires us to draw up to protect ourselves and our businesses. We explain subjects in a straightforward way and ensure that you have the confidence to deal with other parties in a professional and legally compliant way.

    At The Legal Stop we offer great value-for-money – all of our services are carried out on a fixed fee basis with no hidden extras. We also offer a 100% money-back guarantee so you can buy with confidence!
  • Loan Agreements and Debenture Agreements Oct 2, 2013

    Banks and payday lenders are far from the only organisations that offer loans these days. In the current climate of strict lending criteria people are turning to other avenues to obtain much credit when a need arises. If your business is in a position where it is considering giving a loan, perhaps to a member of staff or another party, it is incredibly important to ensure a Loan Agreement is drafted correctly and in place. This will help to avoid any misunderstandings over the terms of the loan and ensure your business is protected against both expected and unforeseen risks and is enforceable in the event of an issue.
    If you are providing a loan to another party and want to make sure you are legally protected but would prefer to avoid the cost of having a solicitor draw up the agreement there are legal templates available that act as a cost effective solution. These are comprehensive, legally binding and completely up to date with current UK law. Costing as little as £13 they can be an economical alternative to costly legal representation.
    A Loan Agreement needs to cover a number of different aspects in order to be fit for purpose. This includes the amount, purpose, rate of interest, repayment schedule, any applicable guarantees, costs and what happens in the event of a default. These are just a few of the clauses that need to be part of the agreement, but there are a number of others.
    In addition to the Loan Agreement you will also need a Debenture Agreement. This is a document that will protect the sum your business is advancing by providing security. The security is provided by the borrower and the Debenture Agreement details the charge that will be taken as security for the sum that is being borrowed.
    When a company takes security in the UK it comes with certain requirements. It has to be registered at Companies House and if land is involved it may also need to be registered at the Land Registry. Because the business that is acting as a lender has a hold or charge over the asset, their interest must be registered so that it cannot be sold without their knowledge or agreement. This is important as it protects the lender. Also, if the borrower was to be declared insolvent at some point the Debenture Agreement would ensure the lender had rights as a creditor. A copy of the Debenture Agreement needs to be sent to Companies House and the Land Registry within 21 days of the security being taken. In addition, Companies House will want to receive a copy of the Loan Agreement and the Form MR01.
    Further information on both Loan Agreements and Debenture Agreements can be found at The Legal Stop – an online business providing high quality affordable legal and business document templates.

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  • Settlement Agreements V Compromise Agreements Sep 23, 2013

    Settlement Agreements came into effect on the 29th of July 2013.

    From 29 July 2013 Compromise Agreements have been replaced by Settlement Agreements.

    Settlement Agreements are, on the face of it, the same as Compromise Agreements, albeit with a new name; the same conditions need to be satisfied for them to be legally binding and they have the same effect of terminating the employment relationship whilst compromising an employees’ employment rights.

    Settlement Agreements are recognised by statute and they are an exception to the general principle set out in all employment legislation that an individual cannot contract out of their statutory employment rights. They are the only way in which an employee can contract out of their rights under employment law. They enable employees to agree to compromise their own statutory employment rights in return for compensation. The main employment rights most often compromised relate to withdrawing an existing, or subsequently refraining from bringing a claim to an Employment Tribunal and/or the courts.

    A Settlement Agreement (formerly known as a Compromise Agreement) is alegally binding contract between an employee and employer which is used to end an employment relationship on agreed terms. In return, the employee generally receives a financial settlement and an agreed form of reference.

    In other words, a Settlement Agreement is an agreement which enables an employee and the employer to agree that the employee will not bring a claim to the employment tribunal and/or the courts against the employer about the issues covered in the agreement in return for a compensation payment. Without a Settlement Agreement if the employee and employer end their relationship, the employee has the right to take a case to the employment tribunal and/or courts if there are grounds to do so.

    There is a range of scenarios in which Settlement Agreements are used. Settlement Agreements can be used to end an employment relationship on agreed terms. They can also be used to resolve an ongoing workplace dispute. Settlement Agreements are often used to safeguard the interests of both employer (who gain certainty they won’t face a tribunal case on any of the grounds covered by the agreement) and employee (who gets a payment and avoids a dismissal in their employment history).

    Settlement Agreements can be proposed by either an employer or an employee and they are voluntary, the parties do not have to agree to them or enter into discussions about them if they do not wish to do so.

    Prior to 29th July 2013, Settlement Agreements were known as Compromise Agreements.

    In practice, there is little difference between a Compromise Agreement and a Settlement Agreement. The main difference between the two is that Compromise Agreements provided limited protection as the “without prejudice” principle applies only to pre-termination discussions entered into between an employer and an employee where there is an existing employment dispute between the parties. Without prejudice is a common law principle which prevents statements (written or oral) made in a genuine attempt to settle an existing dispute from being put before a court as evidence against the interest of the party which made them.

    Settlement Agreements introduced the concept of “confidential” pre-termination discussions. As stated above, to benefit from the without prejudice protection so that such discussions cannot be used in any subsequent tribunal proceedings, there has to be an existing employment dispute before the discussions take place. Since there are often occasions where either the employer or the employee want to enter into pre-termination discussions where there is no existing dispute, the concept of “confidential” pre-termination discussions have been introduced with the intention of encouraging employers and employees to enter into settlement agreements.

    Under the new Settlement Agreements pre-termination discussions where there is no existing dispute are confidential and cannot be used as evidence in unfair dismissal claims. Thus, employers and employees are now able to enter into pre-termination discussions without fear of such discussions being used as evidence in subsequent employment tribunal proceedings, in circumstances where there is not an existing dispute.

    Under the new Settlement Agreements pre-termination discussions/negotiations are kept confidential whether there is, or is not, an existing employment dispute, or where one or more of the parties is unaware that there is an employment problem. Furthermore where there is an existing dispute between the employer and employee, both the 'without prejudice' and new statutory confidentiality provisions will apply, as the new “confidential” and the existing “without prejudice” rules run concurrently.

    To obtain the new “confidential” protection, pre-termination discussions must only be used in circumstances involving a “straight forward” unfair dismissal claim. Pre-termination discussions are not protected if the employee has been dismissed for an automatically unfair reason. Employees are not prevented from bringing claims in relation to 'automatically unfair' dismissals, such as for whistleblowing, trade union membership or asserting a statutory right, by virtue of having entered into a Settlement Agreement. The confidentiality provisions also do not apply to grounds other than unfair dismissal, such as claims of discrimination, harassment, victimisation or claims relating to breach of contract.

    Furthermore, the “confidential” protection also does not apply where there is "improper behaviour" by one of the parties, in which case the tribunal will allow evidence to the extent that it considers it "just".

    Consequently, in the instances above, an employee can use the contents of pre-termination discussions as evidence to support their claim.

    To assist employers, employees and their representatives understand the implications of the changes introduced to the Employment Rights Act (ERA) 1996 in relation to negotiation of settlement agreements; ACAS have produced a Code of Practice on Settlement Agreements (“the Code”). The Code is statutory, but failure to follow it does not entitle an employee to bring a claim for this reason alone.

    In order for a Settlement Agreement to be valid it must comply with stringent statutory conditions. A correctly structured Settlement Agreement will be legally binding on both parties.

    The following conditions must be satisfied in order for the Settlement Agreement to be valid. If these conditions are not satisfied then the Settlement Agreement is not legally binding:

    • The agreement must be in writing.
    • The agreement must relate to a particular complaint or proceedings
    • The employee must have received independent legal advice on the terms and effect of the proposed agreement
    • The agreement must identify the adviser
    • The adviser must be covered by a suitable insurance policy. The policy must cover the adviser against the risk of a claim for losses because of the advice that has been given
    • The agreement must state that the applicable statutory conditions regulating the settlement agreement have been met.

    The Legal Stop is a straightforward online business using information technology for the public good. We aim to make the law and provision of legal services more accessible and transparent to people and businesses alike.
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  • An Overview on Commission Agreements May 21, 2013

    A Commission Agreement, also known as Introduction or Finder’s Fee Agreement, is an agreement where one party (a Supplier of goods and/or services) wishes to engage another (the Introducer) to introduce potential clients for the services and/or goods in return for a Commission. In other words, the Introducer is appointed to introduce potential clients to the Supplier in order to generate more sales and increase the customer base and the Introducer will earn a Commission in return for its efforts.

    Commission Agreements are essentially a type of agency agreement, under which the agent acts as a representative of its principal but has no authority to enter into contractual arrangements on its behalf. Essentially an Introducer differs from an agent as he does not directly sell the products and/or services of the Supplier but it merely introduces potential clients to the Supplier. Once the introduction is made the Introducerwill steps back, it will have no further role in the relationship between the Supplier and the introduced client; the selling and supplying of the services and/or products will be carried out directly by the Supplier.

    Broadly, a Commission Agreement is where one party appoints another party to find third parties who may want to purchase goods and/or services from the first party. Commission is payable to the Introducer if the third party purchases such goods and/or services.

    A Commission Agreement is necessary in order to regulate the relationship between the parties and to set out the rights and obligations of both parties.

    Under a Commission Agreement the Introducer‘s main obligation is to make introductions to the Supplier, however making an introduction does not trigger commission; commission is only payable if, following an introduction, a prospective new client enters into a contract with the Supplier for the goods and/or services. This protects the Supplieras no commission is payable unless the Supplier and the introduced new client enter into a contract.

    Generally in a Commission Agreement the commission fee is calculated on the basis of net income received under a contract between the Supplier and the introduced new client for a certain period (Introduction Period). Please note that the obligation to pay commission is not affected by termination of the Commission Agreement. In other words, Commission is payable after termination in respect of contracts entered into as a result of introductions made before the termination date. This arrangement protects the Introducer against the Supplierterminating the agreement in order to escape payment of commission after a particularly lucrative new client is introduced.

    Another clause that is generally found in these kind of agreements provides that commissionis only payable on income actually received from any contract entered into by the supplier with a prospective new client during the introduction period. This is a supplier-favourable mechanism and protects the supplier against having to pay commission on sums never received, perhaps as a result of breach by the client or early termination.

    For more information on Commission Agreements and to view a Commission Agreement Template click here

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  • Pari Passu Clause in a Debt Instrument May 6, 2013

    Pari Passu is a Latin phrase which means 'equal footstep' or 'equal footing'. In the legal sense, the term is used in the context of 'proportionally; at an equal pace; without preference'.

    In terms of debt instruments, Pari Passu can refer to loans, bonds and some types of securities which have an equal right of payment or level of seniority. In other words, the phrase is used to describe similar ranking of securities or lenders.

    In a loan agreement the Pari Passu clause is a covenant that loans and securities 'rank pari passu' amid all the other unsecured debt of the borrower. The clause is used in the context of unsecured debt securities which are said to rank equally with each other or with other unsecured debts.

    The Pari Passu clause requires the borrower to ensure that the lender’s rights under the loan agreement will, at all times, rank at least equally with all of the borrower's other unsecured and unsubordinated obligations so that the lender’s share of the borrower's assets in the event of its liquidation will be equal to that of all other unsecured and unsubordinated creditors.

    Please note that the Pari Passu clause applies even in secured facilities notwithstanding that is refers to unsecured indebtedness. It is an assurance that the lender’s rights will, if the security fails, rank Pari Passu (equally) with the rights of the borrower’s unsecured creditors and the clause applies to existing as well as future obligations. Its relevance comes if there is a shortfall in the security on enforcement or if the security is for any reason defective.

    Generally in a loan agreement a Pari Passu clause prevents the borrower from incurring obligations to other creditors that rank legally senior to the loan agreement containing the clause. Thus, the purpose of the Pari Passu clause is to ensure that the borrower does not have, nor will it subsequently create, a class of creditors whose claims against the borrower will rank legally senior to the indebtedness represented by the loan agreement.

    The Pari Passu clause is a companion to the Negative Pledge clause. The Negative Pledge clause is an undertaking by the borrower not to create any security over its assets. Both clauses are fundamentally important covenants usually found in loan agreements. Whilst the Negative Pledge ensures that the lender’s right to repayment is not subordinated to secured creditors, a Pari Passu clause tries to ensure that the lender is not subordinated to unsecure creditors.

    In summary, the Negative Pledge and the Pari Passu clause are very important clauses that should be included in every loan agreement in order to ensure that the loan is not subordinated to another lender on insolvency.

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    In our portfolio of templates we also provide debt instruments with a Pari Passu clause:

  • Gifting Shares by way of Deed of Gift May 6, 2013

    A Deed of Gift is a formal legal document used to give a gift of property, money or shares/securities to another person. It transfers the money or ownership of shares/securities to another person without payment in return.

    The person who creates and executes a Deed of Gift to transfer money, property or shares from himself to another person is called a Donor and the person receiving the gift is called the Donee.

    Generally, most Deed of Gift transfers are carried out between family members as property transferred in this way is usually given out of the love and affection the giver has for the recipient.

    Transferring shares, property or money by way of gift must be executed as a Deed because no consideration is given in return for the gift, thus the document has to be witnessed. Please note: the witnesses have to be disinterested parties. In other words they cannot have a stake in the transfer of the property. If a witness stands to benefit or take a loss because of the transfer of the property, then cannot be considered disinterested and cannot act as a witness.

    A Deed of Gift – Shares template shall be used where the Donor wants to give shares or other securities in a company by way of gift to someone else.

    This is an unconditional gift; the Donor gives the shares/securities absolutely and retains no right or interest in the gifted shares.

    N.B. When gifting shares please make sure to check the Articles of Association of the relevant company in order to see if the company’s consent is required before the transfer of shares can be carried out. If the Articles of Association state that the negotiability of the shares is restricted by the prior written approval of the company then the Donor must obtain the approval of the company before the gift can be made.

    Giving a gift to someone can have some Inheritance Tax implications. Generally, any gifts made to any individuals will be exempt from Inheritance Tax payments if the Donor lives for a total of seven years or more after having made the gift. These kinds of gifts are usually known as Potentially Exempt Transfers (PETs).

    However, please note that if the Donor gives away an asset but keeps an interest in it then the gift will not fall within the category of a potentially exempt transfer.

    If the Donor dies within seven years of making a gift and the gift is valued at more than the Inheritance Tax threshold, Inheritance Tax will need to be paid on the value of the gift usually by the Donee or by the representatives of the estate.

    Deed of Gift – Shares
    Deed of Gift – Objects
    Deed of Gift – Property
    Monetary Deed of Gift

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  • Consultancy Agreement Notes Apr 4, 2013

    A Consultancy Agreement is a contract for services between an independent contractor (a self-employed individual) and the client for the provision of consultancy services.

    A consultancy arrangement may be an attractive option for both client and consultant, in part because of the tax advantages. However, the fact that an arrangement is structured and documented as a contract for services and not a contract of employment is not conclusive evidence of the relationship between the parties; HMRC and the employment tribunal will look at the substance of the relationship, rather than the legal form or any labels that the parties have given to the relationship. In other words, a Consultancy Agreement is not a contract for services if the substance of the underlying relationship suggests otherwise.

    Establishing whether the consultant is employed, self-employed or a worker is very important because the status of the consultant will set out:

    • the basis on which the consultant's income is taxed;
    • whether the client will be required to make deductions of income tax and employee NICs) from the consultant's fees and pay employer's NICs;
    • whether the consultant will have the benefit of various employment protection rights available to employees, or the more limited rights available to workers;
    • whether the individual is owed the common law and statutory duties relating to health and safety owed by an employer to its employees or whether the individual (as an independent contractor) is responsible for their own safety.

    There is no single test for determining employment status but there are a number of criteria that are considered when deciding whether a person can be said to be an employee. In determining employment status the employment tribunal and HMRC will look at the substance of the relationship, rather than the legal form or any labels that the parties have given to the relationship. However, there are three fundamental conditions that must be met for an employment contract to exist:

    • the individual must provide his own skill and work in return for pay ("personal service");
    • there is a sufficient degree of control of the individual's activities ("control");
    • the other provisions in the contract are consistent with it being a contract of employment ("other factors").

    It is important to note that when issuing a consultancy agreement to a former employee, the client should try to make the terms as different as possible to the terms of the previous employment contract, as if the nature of the work is similar to that previously carried out on an employment basis, the consultancy arrangement may be deemed to be a continuation of the employment relationship

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    We have a wide selection of legal document templates and forms including Consultancy Agreements.

    Our Consultancy Agreement template is fully comprehensive; it provides a complete framework and reduces the chances for employment-related liabilities to arise. It is also flexible to suit the requirements of both parties and balanced in that it is designed to protect the interests of both parties.

    For more information please visit us at: Legal documents templates, forms to download online | The Legal Stop UK
  • What is a Contract Apr 4, 2013

    A contract is a legally binding agreement setting out the rights and obligations of the parties involved.

    The word "contract" is often misunderstood as it suggests a formal written document. However, according to the law a contract can be made in writing, orally or by conduct.
    Although verbal contracts are enforceable, it is always prudent to have a written document setting out the terms which can then be used as evidence if there is a disagreement later. The Legal Stop offers a wide range of downloadable contract templates and fixed fee bespoke documents drafting, please visit our website for all your legal needs.

    A contract is made only when four criteria are satisfied. They are:

    • Offer
    • Acceptance
    • Consideration, and
    • An intention to create legal relations


    An offer is a promise by one party to enter into a contract on certain terms. It must be specific, unambiguous and capable of acceptance and made with the intention of being accepted. An offer can be made to an individual, a group of persons or even to the world at large and may be spoken, written or implied by conduct.

    An offer must be distinguished from an "invitation to treat", which merely invites the other party to make an offer and does not carry the intention of being bound. An example of an invitation to treat is a display of goods in a shop. The offer to buy is therefore made by the customer and the shop is free to decide whether or not to accept the offer.
    An offer can be cancelled at any time before it is accepted by the other party. If the other party decides not to accept the offer, then they cannot change their mind and accept it as the offer is regarded as having been terminated.


    Acceptance must be made in response to the offer and must correspond with the terms of the offer and it must be communicated to the other party to the contract. An offer can be accepted by a communication to the person making the offer or by conduct. Acceptance by communication can include any clear indication to accept the offer as long as this is communicated to the person making the offer. It is therefore established law that acceptance can occur by clicking ‘I accept’ on a website or even sending an e-mail.

    Sometimes, rather than accept an offer, a party may decide to make a counter-offer. This will amount to a rejection of the original offer so no contract is made. It will amount to a new offer and the person who made the original offer can then choose whether or not to accept it. Where a counter-offer is accepted then those terms rather than the original terms proposed will be the terms of the contract. If this occurs it is often termed "the battle of the forms" and it will often be difficult for the court to determine which set of conditions prevail.

    The general rule is that an acceptance is not effective until it is communicated to the other party who made the offer. There are two rules on acceptance:

    1. The reception rule: it covers situations which involve instant communications such as telephone conversations, face to face negotiations, etc.

    2. The postal rule: as a general rule an acceptance must be brought to the attention of the person who made the offer. However, communication through the post is an exception to this rule. The postal rule is that acceptance is deemed to be effective at the time of sending. This is the position even if the letter is lost or delayed in the post provided of course it was correctly addressed. However, it is always advisable to obtain proof of posting to reduce the risk of disagreement at a later date.

    The difficulty in relation to contracts formed via a website in relation to electronic communications is regarding whether or not the postal rule applies. Please note that the Electronic Commerce Regulations 2002 require suppliers to clearly state how an electronic transaction governed by the regulations is to be completed. If an offer does not specify the method of acceptance then it can be done by any way chosen.


    If a contract lacks consideration then it can only be enforced if it is made by deed. To be considered "good consideration" it must have some value even if, in the context of the agreement, it is only a nominal amount.
    As a general rule, past consideration is no consideration. If a party is merely discharging a pre-existing obligation then there is no consideration for it. An example is where A is owed £20 by B and agrees to accept £10 instead. A is not precluded from later asking B for the balance of £10 as there was no consideration for accepting a lower sum because B was already under an obligation to pay the original amount.

    Intention to create legal relations

    The final point required in order to make a valid contract is to show that the parties intended to create a contract. In commercial transactions there is a rebuttable presumption that the parties intend their agreement to be legally binding. Common ways of rebutting this presumption are by the parties writing comfort letters, letters of intent or by using the words "subject to contract".

    Letters of comfort are used in loan finance transactions. They are issued by third parties and are often given to banks in relation to loans and are letters which provide encouragement or comfort to the lender to proceed with the loan.

    Letters of intent are frequently used when negotiating mergers and acquisitions. The main purpose is to record a non-binding outline of the terms that the two parties have agreed.
    The use of the phrase "subject to contract" is also used to rebut the presumption of contractual intent. It means the parties have not yet reached an agreement and are still negotiating.

    Provided the elements of offer, acceptance, consideration and intention to enter into legal relations are present then a contract will have been formed. Thus, an oral agreement which satisfies these conditions will amount to a binding contract and each party will then be able to rely on those terms, and if necessary can take appropriate action to enforce these.

    The Legal Stop is a straightforward online business using information technology for the public good. We aim to make the law and provision of legal services more accessible and transparent to people and businesses alike.
    We provide fixed fee legal services and legal and business document templates for all types and sizes of businesses. We offer a wide range of downloadable contract templates and online legal services to businesses, start-ups, and individuals. Our services include:

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  • Distribution Agreements Apr 4, 2013

    A Distribution Agreement is a legal contract between a Supplier (generally a manufacturer) that supplies goods and/or services to another party, the Distributor, for resale in a specified territory. Basically, the Supplier wishes to have its products distributed and the Distributor’s role is to develop the largest possible market for a product through distribution, sales and marketing activities.

    A well written Distribution Agreement regulates the relationship between the parties; it should be comprehensive and balanced in that it sets out the rights and obligations of the parties and protects the interests of both parties.

    Distribution Agreements may be exclusive or non-exclusive. In an exclusive distribution agreement the distributor will be the only person permitted to distribute the products/services in the territory.
    Conversely, in a non-exclusive distribution agreement the distributor might be one of several distributors in the same territory.

    Distribution Agreements must be carefully drafted to take into account what the parties are trying to achieve and the implications of competition law and other regulations that can have severe penalties.

    Key elements to be considered include:

    • The territory covered
    • Non-exclusivity or exclusivity
    • Non-compete obligations
    • Responsibilities of the parties in terms of promoting, selling and distributing the products/services
    • Intellectual property
    • Terms and conditions of sale
    • Confidential information
    • Circumstances in which the agreement may be terminated
    • Consequences of termination

    Please note that you can give a distributor exclusive rights to a particular territory, however, under competition law you may not be able to give the distributor exclusive rights and at the same time prevent the distributor from selling competing products.

    You can stop a distributor selling competing products provided you do not have ‘selective distribution’ or have a market share of over 30%. However, the restriction on selling competing products must not be indefinite or last more than five years.

    You have ‘selective distribution’ if you deliberately limit the number of distributors, or require distributors to meet particular qualifying criteria. ‘Selective distribution’ has implications under competition law. In particular, it is illegal to prevent selective distributors from selling competing products.

    You can stop a distributor selling outside the territory if your share of the market on which it supplies the relevant goods or services does not exceed 30%. If you have a market share of over 30% then you cannot.

    Furthermore, a distribution agreement cannot restrict passive sales i.e. if a customer approaches the distributor then the distributor should be free to sell to that customer even if it is outside the territory.

    Finally, please note that you cannot control the prices a distributor charges their customers for the products/services as it would be a breach of competition law.

    The Legal Stop provides several services including fixed fee legal document drafting where you will be able to obtain a distribution agreement specifically tailored to meet your needs. In addition we also offer downloadable distribution agreement templates, our templates are:

    Distribution Agreement - Exclusive
    Non - Exclusive Distribution Agreement

    Our distribution agreement templates are suitable for use in the UK or abroad where the parties to the agreement are individuals or businesses, and can be used for sale and promotion of goods and/or services. They are flexible and can be adapted to suit specific needs of the parties.

    The templates are intended to satisfy the requirements of the EU and UK competition law rules affecting "vertical restraints". They are drafted on the assumption that the supplier's share of the market on which it supplies the relevant goods or services does not exceed 30%; the purchaser's share of the market on which it buys those goods or services does not exceed 30%, and the distributor does not compete with the supplier in the production or manufacture of the products covered by the distribution agreement.

    The Legal Stop is a straightforward online business using information technology for the public good. We aim to make the provision of legal services accessible and transparent for people and businesses alike.

    We provide affordable and transparent diverse online legal services on a fixed fee basis. Our services include:

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