Small print can have big consequences. October’s corporate insights below focus on recent developments and some reminders on getting the detail right.
Anti-oral variation clauses – no longer palatable?
By Catherine Fisher
During the second of our Corporate Insight Seminar series, we talked about how rapidly growing companies can reduce risk and we explained the importance of committing sufficient time to staff training. It is particularly important to ensure that customer-facing staff understand the detail and effect of your standard terms and conditions; particularly the risks involved in offering to vary terms when discussing them with a customer or client.
Many companies draft their terms and conditions to include what lawyers call an ‘anti-oral variation clause’. This mouthful describes a clause that seeks to prevent parties to a contract from amending the terms unless such changes are made in writing. This is to avoid oral changes to the contract, which can be vague and give rise to uncertainty and argument. A valid anti-oral variation clause would, for example, render ineffective any offer over the telephone from one of your account managers to vary your standard payment terms.
Training staff on the proper use of your standard terms and conditions is all the more important since the Court of Appeal decision in June of this year in MWB Business Exchange Centres Ltd v Rock Advertising. MWB managed office premises and entered into a licence with Rock Advertising for an office suite. Rock fell into arrears and MWB gave notice to terminate the licence. Rock alleged that the termination was wrongful because, prior to termination, an oral agreement had been made between a senior employee of MWB and Rock’s managing director to temporarily reduce the monthly licence payments.
Overturning the decision in the High Court (and following the decision in Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd), the Court of Appeal held that an anti-oral variation clause cannot prevent a valid oral agreement to vary the contract by a senior employee who had ostensible authority to do so.
Notwithstanding this decision, it is still worth building an anti-oral variation clause into your standard terms and conditions for two reasons:
• An oral variation is only likely to be binding if made by a senior employee; and
• It encourages people to ensure that changes to the contract are confirmed in writing (a written record of changes to the contract makes it easier to enforce those terms).
Should you have any questions or require help or assistance in relation to these issues please feel free to contact Catherine Fisher, Partner & Head of Dispute Resolution, by email mailto:[email protected] or telephone 01483 215357, or visit https://www.morrlaw.com/team/catherine-fisher/
Charging leases: 5 top tips for landlords
By Lily Meyer
If you lease commercial property and receive an application from your tenant for consent to charge its lease, your first port of call should be to examine what the lease says on this issue.
We have prepared a list of 5 tops tips (below) on what you should look out for:
1. If the lease says nothing about it (or expressly allows your tenant to charge without consent), the tenant is free to charge the property as a whole, or in parts, and the tenant does not need your consent.
2. Check whether your tenant is requesting consent to charge the whole or part of the property. The lease may allow the charging of whole with your consent, but absolutely prohibit the charging of part.
3. Does the lease contain an obligation by the tenant to pay your legal costs for dealing with an application for a consent to charge? If so, ensure that the tenant is aware of this from the outset and obtain a fee estimate from your solicitor so that your estimated costs can be covered by an undertaking requested from the tenant’s solicitor. This should protect you against having to pay any costs yourself, whether or not consent is actually granted.
4. If the tenant is allowed to charge with your consent, you will be under an implied duty not to unreasonably withhold consent (section 19(1), Landlord and Tenant Act 1927).
5. Is the consent of any other party required? If the lease is an underlease, and you only have a leasehold interest in the property yourself, consent may also be required from the superior landlord. If you have a mortgage on your property, whether it is freehold or leasehold, consent from your lender may also be required so it is important to check this.
Should you have any questions or require help or assistance in relation to these issues please feel free to contact Lily Meyer, Commercial Property Associate Solicitor, by email [email protected] or telephone 020 8614 4590.
Flatfooted employer is able to use springboard as remedy
By Michael-Jon Andrews
A ‘restrictive covenant’ is a fairly common contractual provision restricting certain actions of an employee after his employment has ended. These restrictions include the use of business information, along with temporary restrictions from working for a competitor, approaching or dealing with customers, or encouraging former colleagues to leave employment (particularly to join the same competing organisation). Without well drafted restrictive covenants, there is a greater risk that employees could work for a competitor and poach the business of their former employer.
However, what they cannot do (under any circumstances) is take their former employer’s confidential information and use it for their own competitive business advantage (or that of their new employer). In those circumstances, the Courts are prepared to make temporary emergency orders that stop such unlawful activity, even (particularly where the information is highly confidential or even amounts to a trade secret) where there is little or no written contractual protection. These are known as ‘springboard injunctions’ because they prevent a former employee (or their new employer) gaining an unlawful ‘springboard’ into the market that they would not ordinarily have had but for the unlawfully obtained information.
In the recent case of Dorma UK Ltd v Bateman, Mr Bateman, a former branch manager of Dorma (“Mr B“) left to work for a local competitor. Prior to his resignation, he persuaded 3 other employees to leave and join him. Some time later, all 3 simultaneously handed in their resignations. The Court considered evidence of collusion, and in particular Mr B’s failure to report that the 3 employees were planning to move to a competitor. There was also evidence of suspicious requests made to other departments for customer data and large volumes of photocopying.
In granting an injunction against all four employees, the Court applied the terms of Mr B’s restrictive covenants even though the other 3 had no written restrictive covenants. That meant that all four employees were prevented from working for the competing business and poaching its customers. They were also ordered to return the confidential information.
The employer was fortunate in this case that the Court went to great lengths to assist and provide the requested protection. However, it would have been far safer and cheaper to have been able to enforce written restrictive covenants.
Should you have any questions or require help or assistance in relation to these issues please feel free to contact Michael-Jon Andrews, Employment Senior Associate Solicitor by email [email protected] or telephone 0208 9711024, or visit www.morrlaw.com/team/michael-jon-andrews/