News Archive for June, 2012

Have it in writing rather than a handshake

Mike Davey, a partner with DPA Law solicitors, warns of the perils of verbal aka ‘gentlemen's agreements’ in business.
If you want to do business with a gentlemen (or lady), why on earth would you use a gentlemen's agreement?  Images of cads and bounders and Hugh Laurie may spring to mind, but the real issue here is one of trust.
We all trust other people's driving, yet invariably we put on a seatbelt.  Not just because that's the law, but because we would be plain daft not to.   The same applies to gentlemen's agreements.
What is at stake?
Basically, the issue is whether or not you trust the other person, shake their hand and accept their word that certain things covered by that agreement will happen.  In a commercial environment or any environment of practical common sense, the question must be "why take a chance?" Why indeed?
At its best, a gentlemen's agreement (realistically this is a verbal agreement) is as enforceable (or unenforceable) as any other verbal contract.  Much will depend on trying to establish the exact terms of the agreement, whether they are in a letter, a series of letters, an e-mail or exchange of e-mails, or even scribbled on a napkin during a meal - the traditional "back of the envelope" document.
While it may be possible to establish some of the terms of an agreement, it will at best be cumbersome and time-consuming putting together all the various documents containing reference to these.  There is also a substantial risk that some points may be missed out altogether.  Another risk here for someone trying to rely on a verbal agreement is that to bring any successful claim on a verbal agreement it will be necessary to establish to the satisfaction of a court that the terms of the contract were actually agreed between the parties.
Best practice
For the simplest agreement it would be necessary to establish with some degree of certainty the following elements:
• The Parties
• What was actually agreed (i.e. - who was supplying or "doing" what for whom?)
• What price was to be paid and what other terms for payment were agreed?
• What timescale was agreed?
• What default procedures were agreed (if any)
• What other points were agreed.
The bottom line is that you really do not want to rely on any form of verbal or gentlemen's agreement - get it in writing!
To do this it may not need an all-singing all-dancing contract; indeed, simple bullet points of what has been agreed may well suffice.  So, consider for a moment "Heads of Terms" or "Heads of Agreement" - A very useful compromise between having nothing at all or something as ineffective as a gentlemen's agreement and the "all-singing-all-dancing" full commercial agreement referred to above.
While Heads of Agreement are more often than not expressed to be non-binding and of no legal effect (save for a couple of points e.g. confidentiality provisions), it is possible to have binding Heads of Terms.  This happens if the parties are confident that the bullet points are sufficiently detailed to give a concise "mini-contract" from the date of signing.
The risk is that the Heads of Terms will not be detailed enough to do this and the parties will back themselves into a corner and agree to take on obligations which may prove difficult or impossible to enforce.  However, one person's difficulty is another person's benefit and benefits are very genuine if they are perceived as such whether or not they are real.
To put it another way: The parties might enter into binding Heads of Terms, even if there are difficulties with some of the provisions of those Heads of Terms.  Nevertheless, the parties may be substantially better off with such a document than nothing at all.  As with so many things in life, it is a matter of applying the right size spanner to the nut in question.
If you run a business and need assistance in relation to commercial agreements or terms and conditions of business, whether drafting your own or becoming party to another’s, DPA Law can advise you of all legal considerations. Please feel free to contact our business services department by telephone on 01554 749144 or by email mike.d@daviesparsonssolicitors.co.uk or
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Posted by Peter Nicholas on Wednesday, June 27, 2012 at 02:05 PM

Sickness and Annual Leave

If a worker is sick during annual leave can they take their annual leave at a later date?

Yes, says the CJEU in ANGED v FASGA, they can regardless of when the period of sickness began.

This was a reference for a preliminary ruling from the Tribunal Supremo (Spain) concerning the interpretation of Article 7(1) of Directive 2003/88/EC. Article 7 entitles worker to four weeks annual paid leave each year. This period may not be replaced by an allowance in lieu, except after termination.

The court considered the following propositions:

First, the entitlement to paid annual leave is an important principle of European Union law enshrined in the Charter of Fundamental Rights of the European Union.

Second, the right to annual leave cannot be interpreted restrictively.

Third, annual leave and sick leave have different purposes.

Fourth, a worker who is on sick leave during scheduled annual leave has the right to take annual leave at a different time.

Therefore, it would be contrary to the purpose of annual leave to grant that right only if the worker was already unfit for work when the period of annual leave commences.

Article 7(1) must be interpreted as precluding national provisions under which a worker who becomes unfit for work during a period of paid annual leave is not entitled subsequently to the paid annual leave which coincided with the period of unfitness for work.

The original article featured in Daniel Barnett’s Employment Law Mailing List. Daniel Barnett is a barrister in independent practice and his mailing list is available to subscribers. 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Posted by Peter Nicholas on Wednesday, June 27, 2012 at 12:36 PM

The Changing Face of Divorce

Statistics show that 33 per cent of marriages that took place in 1995 had ended in divorce 15 years later. This compares with 22 per cent of marriages that took place in 1970. The workload of the Family Courts has consequently risen over this period, leading to many delays.

In an effort to tackle the problem, changes to the divorce process have been proposed (http://www.justice.gov.uk/about/moj/independent-reviews/family-justice-review). Under the proposals, which have been agreed by the Government, the process for initiating divorce will begin via an online hub or telephone service. The new web service is to be commissioned this year and will provide independent information for separating couples and direct them to services relevant to their needs. The telephone service will follow in 2013.

Divorcing parents are to be encouraged to draw up Parenting Agreements. These set out the practical arrangements consented to by the parents for the care and support of their children. The courts will no longer consider arrangements for the children in an uncontested divorce case.

The emphasis of the new system will be on resolving problems out of court, with the courts only becoming involved where really necessary. To facilitate this, legislation will require divorcing couples to attend a Mediation Information and Assessment Meeting, strengthening the requirement to consider mediation that has been in place since April 2011.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Posted by Peter Nicholas on Monday, June 18, 2012 at 02:24 PM

Take Care on Business Disposals

Business owners will be aware that entrepreneur’s relief operates to reduce the Capital Gains Tax on qualifying business assets and that the availability of the relief can be crucial in obtaining a low-tax exit when a family business is sold.

However, as with all reliefs, HM Revenue and Customs (HMRC) insist that the qualifying criteria are met. One of the important traps facing people expecting to obtain entrepreneur’s relief is that if the disposal is a disposal of assets, rather than a business or definable part of a business, the relief is not available.

A recent case showed the approach HMRC may take (http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC01542.html) in some cases. It involved a food distribution business which was built up over the years. Eventually, part of the business, including the goodwill and trademarks, was sold to one of the former customers of the business.

HMRC attacked the vendor’s claim for entrepreneur’s relief on the ground that the sale constituted only the sale of assets, not of the business.

On this occasion, the First-Tier Tribunal rejected HMRC’s arguments.

If you are considering selling your business, especially if you are considering selling only part of it and retaining part, make sure you take professional advice early and certainly before you take any irrevocable action. The best approach is normally to ensure that the deal is structured in a way that makes it unassailable.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article

Posted by Peter Nicholas on Monday, June 18, 2012 at 02:23 PM

Welder Wins Compensation for Head Injury

A welder who suffered a head injury at work has won an out-of-court settlement in compensation.

Peter Hibbert worked as a robot operator for a company that builds forklift trucks. He was working on the machine that makes the lift mechanism when the accident happened. He was hit on the head by a metal clamp used to move parts around.

The blow knocked Mr Hibbert unconscious and he suffered whiplash injuries to his neck and shoulders. As a result, he was absent from work on sick leave for 18 months and was eventually made redundant.

Mr Hibbert still has short-term memory problems and struggles to keep up with conversations. He is also unable to lift heavy objects. Although he has been able to find alternative employment, his injuries mean that he is restricted as to the types of jobs he can do.

He brought a claim for compensation against his former employer on the ground that the machine on which he was working at the time of the accident was faulty. It was his contention that this had gone unnoticed because the company had neglected to put in place a proper inspection system. His employer disputed this but agreed to settle the claim out of court.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Posted by Peter Nicholas on Monday, June 18, 2012 at 02:22 PM