The objectives of this seminar were to:- Enable project professionals to reach contract close quicker with a superior contract in place. Assist project professionals to interpret and manage contracts with more vigour. De-mystify legal terminology. Enable project professionals to brief and constructively challenge their lawyers.

1. Basic Contract Law for Successful Projects
APM London
11 March 2013
Lawyers & Parliamentary Agents

2. Basic Contract Law for successful
projects
• Welcome
• Protecting your Position Pre-contract
• Intellectual Property
• Contract Formation and Good Practice
• Refreshments
• Unfair Contract Terms & Best Endeavours
• Public Procurement Law – Rules and Risks

3. Protecting your Position Pre-contract
Huw Morgan, Partner
Lawyers & Parliamentary Agents

4. Protecting your position pre-contract
• Confidential information
• Contract negotiations
• Heads of terms
• Letters of intent

5. Confidential Information
• Commercial position
• The very existence of a project might be
confidential
• Feasibility studies and site visits
• Correspondence
• You cannot consider the possibility of a breach of
confidence too early

6. • Legal Position
• The Law recognises a secret!
• Confidential information is protected
• But what is confidential information?

9. What is Confidential Information?
• Is the information public property?

11. What is Confidential Information?
• Is the information public property?
• Has any value been added?

14. What is Confidential Information
• Is the information public property?
• Has any value been added?
• Was the information transmitted in confidence?

18. Please vote now using your keypads
Were the technical details of ‘Invisigrip’ described by
Mr Seager confidential information?
1. Yes
2. No

19. • Mr Seager won
• Invisigrip details were confidential
• The details were not in the public domain and
were transmitted in confidence

22. Please vote now using your keypads
Was the ‘sales information’ used by Mr Fowler
confidential information?
1. Yes
2. No

23. • Mr Fowler won
• The sales information was not confidential
• The sales information was never treated as
confidential or transmitted confidentially

24. • Practical Protection
• Be clear what is confidential and treat it as such
• Legal Protection
• Consider a confidentiality agreement

26. Confidentiality Agreement
• It does not make all information confidential
• Permitted disclosure
• Permitted uses
• Duration
• Termination of the project

27. Please vote now using your keypads
Which statement will give you the best protection
during your pre-contract negotiations?
1. Without prejudice
2. Subject to approval
3. Subject to more complete documentation
4. Subject to contract

28. Heads of Terms
• Records the underlying principles of the deal
• Cover the key issues
• Time
• Cost
• Quality
• Recognises a watershed in the negotiations
• Saves time and money in drafting

29. Binding or Non-binding?
“These Heads of Terms are not intended to be
legally binding between the parties except as
expressly set out in the Heads of Terms”

30. Heads of Terms
• Cons
• hostage to fortune
• duplication
• parties may treat it as a substitute for the contract

31. Heads of Terms
• Pros
• record underlying principles of the deal
• provides less wriggle room
• recognises a watershed in the negotiation
• a useful summary of the whole deal

32. Letters of Intent
• Why?
• Commercial issues
• Pitfalls

33. Please vote now using your keypads
Which of these phrases would encourage you to
commit funds to an IT upgrade prior to signing the
contract?
1. I may possibly give you the contract
2. I instruct you to purchase the IT upgrade and will
pay you for it
3. I promise to give you the contract

34. Commercial issues
• I, the Customer, will pay you, the Supplier, for
Materials up to [financial limit]
• If the contract is not signed
• I will still pay for the materials
• They will become mine
• I will not pay for loss of profit

35. Pitfalls
• “I promise to give the Contract”
• The Customer may be liable to pay the Supplier
for work carried out and loss of profit upon the
entire contract if it does not go ahead

36. Pitfalls
• “I may possibly give you the Contract but please
go ahead”
• The Customer pays for the work carried out but
without recourse if performed poorly
• The Customer pays upon the basis of “Quantum
Meruit” – “what he deserves”

37. Protecting your position pre-contract
• A properly drafted Letter of Intent is itself a
contract but limited
• In time
• In cost
• In work/materials/services

38. Protecting your position pre-contract
• Is any information confidential?
• Is correspondence subject to contract?
• Is the purpose of the Heads of Terms clear?
• Is a Letter of Intent needed?

39. Huw Morgan, Partner
hmorgan@vwv.co.uk 0117 314 5293

40. Intellectual Property
Doug Locke, Partner
Lawyers & Parliamentary Agents

41. Types of right
• Trade marks
• Copyright
• Patents

42. Trade marks
Canberra Harwell

43. Copyright

44. Patents
Game playing apparatus comprising sheet material defining a
confined playing area, a plurality of columns of loci delineated
on said playing area, the loci being of such size and spacing as
to permit the placing of different portions of the human anatomy
on different loci, different groups of loci being of different
colors, a chance controlled selection device comprising a
spinner board bearing indicia designating different group colors
and different ones of said portions of the human anatomy and a
spinner or pointer pivotally mounted centrally on the board and
adapted to be spun and then allowed to come to rest to select
indicia designating a group color and a portion of the human
anatomy.

45. Please vote now using your keypads
Which of the following do not exist?
1. Moral rights
2. Database rights
3. Olympic association rights
4. Cattle variety rights
5. Plant variety rights
6. Rights in Peter Pan (that will never expire)

46. Asserting rights
• Deterrent
• Reduces uncertainty
8Copyright
8Design right
• Registration

47. Collaborations
• Deal with intellectual property in a written
agreement
• “50/50” ownership
• Background and foreground rights
• Be specific
• Don’t agree to assign/license what you don’t have

48. Enforcement of rights
• Who may enforce?
• Who must assist?
• Who pays?
• Who gets compensation?

49. Competition law
• Intellectual property is “anti-competitive”
• Things to avoid:
• Price fixing
• Dividing up the market

50. Summary
• Clear written agreements
• Register trade marks

51. Doug Locke, Partner
dlocke@vwv.co.uk 0117 314 5602

52. Contract Formation and Good Practice
Huw Morgan
Lawyers & Parliamentary Agents

53. Essential Elements
Offer

54. Offer
• Specific
• Complete
• Capable of acceptance
• Contain the key terms of the contact
• Non negotiable
• Intended to be binding

55. Invitation to Treat
• simply invites other party to make an offer
• not binding

56. Essential Elements
Offer
Acceptance

57. Acceptance
• An offer must be accepted without qualification
• A counter-offer extinguishes the original offer
• Acceptance should be communicated, but
sometimes conduct may be considered
acceptance

58. Offer or invitation to treat?
The display of goods for sale in shops:

59. Please vote now using your
keypads…
The display of goods for sale in shops:
1. Offer
2. Invitation to treat

60. Offer or invitation to treat?
Vending machine:

61. Please vote now using your
keypads…
Vending machine:
1. Offer
2. Invitation to treat

62. Essential Elements
Consideration
Offer
Acceptance

63. Essential Elements
Consideration
Offer
Intention to create
Acceptance
legal relations

65. Offer and Acceptance
British Road Services Ltd v Arthur V Crutchley & Co

67. • British Road Services v Arthur V Crutchley & Co.
• BRS collect Whisky in Edinburgh
• Delivered to a warehouse in Liverpool
• Whisky stolen overnight
• BRS reimbursed the owner of the Whisky
• Who was liable as between BRS and AVC ?

68. Offer and Counter Offer
• British Road Services v Arthur V Crutchley & Co.
• BRS claimed to have sent a Contract to AVC
• AVC said they hadn’t received it
• BRS presented a delivery note to the
warehouse office on arrival
• AVC stamped it “received on AVC Conditions”
• BRS unloaded the Whisky

70. Offer and Acceptance
RTS Flexible Systems Limited v Molkerei Alois
Müller Gmbh & Co

71. RTS v Muller
• Muller commissioned RTS to build two new
production lines
• Work started without a signed Contract
• Letter of Intent dated 1 March 2005
• Letter of Intent expired 27 May 2005
• July price agreed at £1,682,000
• July MF/1 terms and Schedules almost agreed

72. • No signed Contract
• November 2005 parties fell out
• RTS wanted to be paid
• Muller counterclaimed for failure of the new
production line
• Was there a contract and if so on what terms ?

73. Please vote now using your keypads
What was the contractual position between RTS and
Muller?
1. No contract between them
2. Contract on limited terms (i.e. No MF/1 or
Schedules)
3. Full Contract on MF/1 and Schedules

74. Reasons
• Supreme Court said full M/F Terms
• No Contract – unconvincing as a price had been
agreed and work carried out
• Limited Contract terms – Almost all terms of the
MF/1 and Schedules agreed do this didn’t reflect
the facts

75. Reasons
• Full Contract on MF/1 and Schedules
• All terms of real importance agreed
• Counterpart clause “contract not effective until
each party has executed a counterpart and
exchanged it with the other”
• Court found that the parties had waived this
restriction by their conduct in carrying out and
paying for part of the works

76. Who won ?
• RTS had the benefit of the limitation clause in the
MF/1
• Muller had the benefit of the technical Schedules
which they said RTS had breached
• Both parties were in Court for five years before
the matter was resolved.

77. RTS v Muller
“The moral of the story is to agree first and to start
work later” Lord Clarke

78. Good Practice
• Deed – 12 years liability
• Under hand – 6 years liability
• Storage
• Execution – effective from dating
• Commencement of the Services
• Effective Date

79. Contract Amendments
• Can you amend a contract in manuscript?

80. Manuscript amendments

81. Please vote now using your keypads
Is a contract legally binding if amended in manuscript?
1. Yes
2. No
3. It depends

83. Manuscript Insertions
2.1 The parties agree that the commencement date
shall be the date in the Appendix
Appendix
2.1 – The date shall be ………………………

84. Huw Morgan, Partner
hmorgan@vwv.co.uk 0117 314 5293

85. REFRESHMENT BREAK

86. Unfair contract terms &
Best endeavours
Doug Locke, Partner
Lawyers & Parliamentary Agents

87. Unfair Contract Terms Act
(UCTA)
• General principle – parties free to contract on any
terms
• Unfair Contract Terms Act (UCTA) limits a party’s
ability to restrict or exclude its liability
• No restriction of liability for (i) death or injury
resulting from negligence or (ii) fraud

88. UCTA Prohibitions
UCTA also prohibits:
• the restriction of liability caused by negligence
unless the term is reasonable
• in contracts on a party’s written standard terms,
clauses which permit that party to restrict liability
for breach of contract unless the term is
reasonableness

89. UCTA Reasonableness Test
To be reasonable, a clause must be:
“fair and reasonable having regard to the
circumstances which were, or ought reasonably
to have been, known to or in the contemplation of
the parties when the contract was made”

90. UCTA Reasonableness Factors
Reasonableness Factors:
• Bargaining strength
• Opportunity to avoid
• Knowledge
• Availability of insurance cover

91. UCTA Consequences
• Either valid or struck out – no middle ground
• If struck out, normal damages rules apply
• Divide up clauses

92. Frans Maas v Samsung (2004)

93. Frans Maas v Samsung (2004)
• Samsung claimed £2.6 million from Frans – theft of 26,000
mobile phones from Frans’ warehouse
• Samsung – theft was an “inside job”
• Frans – British International Freight Association (BIFA)
standard terms of contract were incorporated
• BIFA terms - Frans’ maximum liability based on weight, not
value
• Frans – BIFA terms capped liability at £25,000
• Samsung – Cap on liability was unfair and in breach of UCTA

94. Please vote now using your keypads
Does UCTA apply in principle to the clause stating that
Frans should only pay £25,000?
1. Yes
2. No

95. Frans Maas v Samsung (2004)
• Clause subject to UCTA
• Reasons:
• Restricts liability in respect of negligence
• Restricts liability in respect of breach of
contract

96. Frans Maas v Samsung (2004)
Court held:
• Theft was an inside job
• Frans liable for actions of employees and
negligent security
• Losses subject to application of limitation clause

97. Please vote now using your keypads
Applying UCTA, what should Frans pay to Samsung?
1. Nothing
2. £25,000
3. £2,600,000
4. None of the above

98. Frans Maas v Samsung (2004)
• Court held that clause was fair and reasonable:
• No inequality of bargaining power
• Routine term in freight industry
• Samsung could have agreed higher limit
• Samsung awarded £25,000 – less than 1% of
original claim

99. Yuanda v WW Gear (2010)

100. Yuanda v WW Gear (2010)
• Contract for fitting of curtain walling
• Incorporated Gear’s “standard amendments to contract” –
minor variations agreed between parties
• Clause 9A – if Yuanda commence adjudication then Yuanda
would be liable for both parties’ costs irrespective of outcome
• Yuanda – 9A in breach of UCTA as:
• Contract formed on Gear’s standard terms
• Clause an unreasonable restriction
• Gear – No breach of UCTA as contract was a negotiated deal
and not on Gear’s written standard terms

101. Please vote now using your keypads
Was the contract on Gear’s written standard terms and
so subject to the provisions of UCTA?
1. Yes
2. No

102. Yuanda v WW Gear (2010)
No – Court held that:
• To be standard terms, must be terms that the
company uses for all its contracts without
alteration
• Gear’s standard terms (but not the relevant
clause) had been varied by negotiation
• No longer standard terms
• UCTA did not apply

103. St Albans v ICL (1995)

104. St Albans v ICL (1995)
• ICL supplied computer system to St Albans
Council
• Contract negotiated and minor amendments
made to ICL’s standard terms
• Software faulty and not enough tax collected
• St Albans claimed £1 million in damages
• ICL standard clause limited liability to £100,000

105. Please vote now using your keypads
Had the parties contracted on ICL’s written standard
terms?
1. Yes
2. No

106. St Albans v ICL (1995)
• Amendments to ICL’s standard terms only very
minor so still contracting on standard terms

107. Please vote now using your keypads
Was the cap on liability clause fair under UCTA?
1. Yes
2. No

108. St Albans v ICL (1995)
• Cap on liability clause unfair:
• ICL was a large company with substantial insurance
• The limitation of £100,000 bore no relation to ICL’s insurance
cover of £50 million
• ICL was in a strong bargaining position due to urgency
• St Albans had not been offered any inducement to accept
limitation
• St Albans had no opportunity of getting better terms

109. Enforceability of limits of liability
• A clause that imposes a higher limit liability will
stand a better chance of being enforceable
• A clause that purports to impose a lower limit of
liability is less likely to be enforceable
• Divide up limitations of liability
• Offer alternatives
• Is the limit justifiable?
• Each contract turns on its facts

110. Enforceability of limits of liability
• Courts consider what exclusions are in the
customer’s own terms
• Beware:
• dealing with smaller customers
• dealing with customers who have little choice
but to buy from you

111. Enforceability of limits of liability
• Preamble/recital may assist – for example:
• “The supplier has obtained insurance cover in
respect of its own legal liability for individual
claims not exceeding £100,000 per claim. The
supplier’s liability is therefore limited to £100,000
and the buyer is responsible for making its own
arrangements for the insurance of any excess
loss.”

112. Endeavours
• Best endeavours
• Reasonable endeavours
• All reasonable endeavours

113. Endeavours
Jet2 v Blackpool Airport

114. Please vote now using your keypads
“All reasonable endeavours”?
1. More than “reasonable endeavours”, but less than
“best endeavours”
2. The same as “best endeavours”
3. Meaningless

115. Jet2 v Blackpool Airport
“Jet2 and Blackpool Airport will use their best
endeavours to promote Jet2’s low cost services
from Blackpool Airport, and Blackpool Airport will
use all reasonable endeavours to provide a cost
base that will facilitate Jet2’s low cost pricing.”

116. Endeavours
• Jet2 operated flights outside Blackpool Airport’s
normal hours.
• Blackpool Airport made a loss on those flights.
• New management arrived at Blackpool Airport.
No more out-of-hours flights.

117. Endeavours
• “Jet2 and Blackpool Airport will use their best
endeavours to promote Jet2’s low cost services
from Blackpool Airport, and Blackpool Airport will
use all reasonable endeavours to provide a cost
base that will facilitate Jet2’s low cost pricing.”

118. Please vote now using your keypads
Did Blackpool Airport have to stay open for the out-of-
hours flights?
1. Yes
2. No

119. Endeavours
• “Endeavours” clauses rarely give a clear answer.
• If possible, be explicit in advance.

120. Doug Locke, Partner
dlocke@vwv.co.uk 0117 314 5602
Lawyers & Parliamentary Agents

121. Public procurement law – rules and risks
David Hansom, Partner

122. Overview
• Introduction to procurement in context
• What rules apply and when?
• What to do if you are unhappy
• The future

123. Introduction to procurement
• EU law requires public contracts to be
competitively tendered
• Public procurement regime applies to all
‘contracting authorities’
• Detailed EU rules apply to some purchasing –
can be complex and are driven by case law
• Pitfalls for the unwary

124. Introduction to procurement
• 3 levels of rules : bigger spend = more detailed
• EU treaty principles of equality of treatment,
non discrimination and transparency (apply
to all)
• Authority specific internal purchasing rules
(apply to all)
• Detailed EU rules (apply to higher value
purchases but only to certain services)

125. Please vote now using your keypads
When were the most recent amendments to the public
procurement rules in the UK?
1. 2006
2. 2008
3. 2011

126. Public Contracts Regulations -
thresholds
Contract type Contract Value
Supplies – the purchase and £173,934 ex VAT
hiring of goods
Services – the purchase of £173,934 ex VAT
services. Not all services covered
(Part A / Part B)
Works – done for you or to £4,348.350 ex VAT
specification
Values reset every two years by EU – above effective 1
January 2012

127. Below threshold or exempt contracts
• Limited exemptions to the rules such as
• Land purchase or disposal
• Research and development contracts
• Less onerous rules for “Part B” residual services
and below threshold contracts
• Catering, education, health and social care
contracts are all Part B services

128. If the EU rules do not apply
• Authorities still need to follow internal
procurement rules e.g contract up to £25k,
seek three bids and choose lowest price?
• EU advert needed only if cross border interest
• Needs “relevant and proportionate” advertising
and then fair and transparent mechanism to
appoint bidder

129. Ways to market- EU rules
• Three ways for public sector to buy
• Bespoke new procurement process
• Set up new framework or call off existing
• Buying collaboratively and sharing services

130. Bespoke procurement
• 4 routes – open, restricted, competitive dialogue, negotiated
• Open and restricted most common
• Similar except Restricted has a pre qualification stage
• Straightforward spend, commodities or supplies but no
negotiation on contract terms
• Government now mandating open for central government
• Competitive dialogue
• For particularly complex contracts
• Negotiated
• Effectively closed off

131. Timescales under the rules
Stage Open Restricted Competitive Competitive
negotiated dialogue
37 days (30 if 37 days (30 if 37 days (30 if
PQQ None
electronic) & electronic) & electronic)
urgency grounds urgency grounds
52 days (45 if 40 days (35 if
Tender No statutory No statutory
electronic) electronic) &
urgency grounds minimum minimum
10 days (15 if 10 days (15 if post), 10 days (15 if post), 10 days (15 if
Standstill
post), extended extended if ends extended if ends post), extended if
if ends on non on non working on non working ends on non
working day day day working day
All routes - contract award notice within 48 days of award

132. Bespoke new procurement
• Framework agreements under any route
• Minimum timescales to reply to advert, complete
tender
• Evaluation criteria must be clear and transparent
• Minimum 10 day “standstill” period after choosing
winner and notifying losing bidders
• Minimum levels of information must be provided to
all unsuccessful bidders
• You can challenge breach of rules

133. Frameworks and shared services
• Framework is a contract setting up the basic terms with one or
more suppliers with no guarantee of minimum work levels
• Direct call off or mini competition
• Single or multiple supplier
• Can use existing frameworks instead of new process
• Common issues
• Prices and contractors are fixed for term – 4 years max
• Limited scope to change terms and conditions
• Is the authority entitled to use it?

134. Practical tips for successful bidding
• Do
• Understand the process, timings and
evaluation
• Be clear on minimum hurdles and
requirements to make sure you can meet
them
• Check and double check your responses
• Check credit rating etc before you bid and
get them amended if wrong

135. Challenging procurement decisions
• Challenges and complaints about procurement
increasing
• Economic crisis means fewer new opportunities
• Considerable competition for those remaining
• Frameworks and long term contracts cause
exclusion from market
• Often failure to win on retender can mean
business closure

136. Challenging procurement decisions
• There are two legal routes to challenge
• Under the Public Contracts Regulations 2006 –
bidders only and strict time limits
• Judicial review – wider reach but remedy of
last resort – full three months to bring
• Breach of implied contract?
• Also complaints to Cabinet Office/ European
Commission etc – no time limits and free!

137. Please vote now using your keypads
What remedies do you have as an unhappy losing
bidder?
1. Damages
2. Automatic suspension before award, damages
before and after award
3. Civil Financial Penalties
4. All of the above

138. Remedies
• Under new rules
• Before contract award – injunctive
proceedings, automatic suspension of award
decision, damages
• After award – cancellation, damages,
unlimited Civil Financial Penalty (fines)

139. Remedies available
• For Part B services or smaller value
procurements
• Damages claims, bad publicity,
• Judicial review - court could stop process
• For EU procurements
• Before award – all above plus suspension of
award and fines
• Post award – all above plus cancelled
contract/shortening and fines

140. Time limits to challenge
Type of Old rules (claim pre New rules (claim from
claim 30/09/11) 1/10/11)
Cancellation 6 months from entry of contract: Provisions unamended
VEAT – 10 days
CAN – 30 days if no OJEU
Telling all bidders – 30 days
(promptly) and within 3 months of 30 days from the date of bidder
Damages
bidder date of knowledge knowledge

141. Automatic suspension
• Suspension of contract award procedure
• Triggered by standstill letter
• Must not award if claim form issued in respect of
award decision – automatically ineffective if so
• Must apply to Court to have suspension lifted
• Or will stay in place until first hearing

142. Automatic suspension
• BUT – Court taking cautious approach
• Suspension only upheld if challenger can meet
standard test for injunction under American
Cyanamid principles ie
• Strong, not just arguable case
• Damages as adequate remedy
• Balance of convenience
• Status quo

143. Automatic suspension
• MOST cases so far have approached in this way
• Indigo v Colchester College
• Exel Europe v University Hospitals Coventry
• Halo Trust v SOS International Development
• Only different case in Northern Ireland
• First4Skills v NI Dept for Education &
Learning refusal to lift suspension to
ensure continuity of similar claims

144. What to do if you are unhappy
• Do
• Engage with the authority during the process
• Interrogate scoring and evaluation criteria immediately –
are they clear on hurdles and minimum requirements?
• Seek information where you are entitled to it
• Raise concerns quickly – very strict time limits to
challenge
• Seek advice if you want to challenge
• Do not
• Make vexatious claims – risk of costs

145. Hot topics and cases
• Some key trends in case law
• Transparency
• Mears v Leeds City Council – must
disclose all evaluation criteria sub
criteria and weightings
• Traffic Signs v Dept for Regional
Development (NI) – relevance and
proportionality of criteria – logic

146. Managing when things go wrong
• Apcoa v Westminster City Council – authority
can always terminate procurement process.
Should be clear in tender documents
• Mermec v Network Rail Infrastructure - time
limits will be strictly interpreted

147. Future reforms
• Reforms to the procurement rules?
• More flexibility to negotiate
• Quicker processes
• Part A/B services distinction abolished
• SMEs and new entrants
• UK position – more freedom to negotiate,
exemption for 3 years for new start up social
enterprises
• New directive drafted – 2014 in force?

148. Summary
• Key area of current Government focus
• Understanding procurement is key to access pubic
sector contracts
• Use the rules to help you understand procurements
and be quick to follow up if not happy
• More changes coming soon
• Training for teams

149. David Hansom, Partner
dhansom@vwv.co.uk 0207 665 0808
Lawyers & Parliamentary Agents

150. Basic Contract Law for Successful Projects
APM London