Although the romantics amongst us wouln’t admit it, in some ways making a contract is just like getting married. Certainly, there is a general unwillingness to even admit the prospect of separation or divorce at the wedding ceremony, let alone discuss the exact terms and conditions of an eventual break-up with the vows of eternal togetherness. And so it is with contracts, too. Potential commercial partners, when courting in the intensive passion of the negotiations, spend little time to think what could happen if or when the end is nigh. Contracts do end. Just as they have a beginning so they will have an end. We should pay equal attention to both types of events and certainly have detailed provisions in the contract. When a contract starts  (the date of effectiveness and validity) should be clearly stated in the agreement. Similarly, we should have contract clauses, as applicable, on if, how and when a contract can be brought to an end by: a) the expiry of the contract term b) termination for breach or other events c) termination for convenience d) rescission ab initio so that the parties are returned to their starting position In some contract situations the parties may dare to briefly talk of termination, cancellation and rescission somewhere in the “Miscellaneous” section. But, the parties often do so without knowing exactly what they mean and realising that at law such words can have very different meanings and consequences. In the recent case of Hardy v Griffiths  [2014] EWHC 3947 (Ch) it was  held that the sellers of a property had in fact rescinded the contract ab initio (and not terminated it), with the unwanted result that they lost their rights to claim damages and to forfeiture of the deposit. Breaking up is made even more complicated by international relationships: so-called cross-system contracts in which law and language are mixed. Thus, a German law contract drafted and agreed in the English language only, will have a hard job with an English law term such as rescission? Does it mean Anfechtung, or could it be Aufhebung, but then again, what about Rücktritt or even Kündigung? These are examples of the pitfalls of cross-system transactions. Translate with care!   But, most importantly, make sure that you do consider from the very beginning and  set out exactly in your contract doucumentation the circumstances that can result in a contract ending, how it will end and the respective rights and duties of the parties. Separation can then also be a postive experience!      ...

At the commencement of negotiations or in particular types of deals such as M&A or IP or R&D it is always advisable to use extensive confidentiality agreements either as stand-alone contracts (non-disclosure agreements) or as long-form (extended) clauses in other documents e.g. in a letter of intent, LOI. You will need to take time and great care, particularly if you are a potential disclosing party, when drafting provisions on dealing with your organisation’s information. Information is knowledge and knowledge is power and, at the end of the day, a valuable commercial asset. Below you will find the beginnings of such an extended non-disclosure boilerplate clause as is often employed under English law. A full-form clause contrasts with shorter form versions (see Confidentiality in brief ) because of its length and its attention to details  and definitions. Here is a useful checklist for such extended non-disclosure clauses/agreements. Depending on your party’s position and interests, confidentiality agreements should contain: 1. a full definition of the material covered (confidential information); see text below, 2. a set of exclusions for information disclosed in particularly circumstances (e.g. as required by law or court order) or, for particular types of information (e.g. already in the public domain), 3. an explanation of exactly how and for what purposes information may be disclosed to third parties or employees etc. (e.g. for the purpose of contract performance only), 4. an express exclusion of any transfer of IP rights to information, 5. a description of what is to happen at the ending of the contract/application of the clause, 6. an exclusion of (implied/express) warranties and representations related to the accuracy or  completeness of information disclosed or its fitness for purpose,   7. a definition of the exact period of effectiveness of the confidentiality undertakings (e.g. survival clause) 8. a definition of the parties covered (e.g. affiliates, subcontractors, employees etc.) and an undertaking to make such subject to the confidentiality obligations/rights. The first point of the checkpoint mentions a definition of confidential information. This is the foundation on which the rest of a confidentiality clause is built. Here is an example of such a long-form definition: Confidentiality1.1 “Confidential Information” means all confidential information (in whatever tangible or intangible form and however recorded or preserved, stored or otherwise retained) which is disclosed directly or indirectly by one Party (“Disclosing Party”) through or by its employees, officers, agents, representatives or advisers (hereinafter all referred to as “Representatives”) to the other Party or that Party’s Representatives whether before or after the date of this Agreement in connection with [DESCRIBE EXACTLY THE TRANSACTION OR CONTRACT] concerning:(a) the existence and terms of this Agreement [ and DESCRIBE ANY OTHER AFFECTED CONTRACTS](b) any information that would be regarded...

The boilerplate below (Confidential Information) is a typical short form confidentiality clause for use in general commercial contracts. It is based on English law. The attraction of its brevity shall not be allowed to hide the obvious lack of a comprehensive definition of confidential information. At the same time your contract may require a more detailed set of exceptions. In such case a longer form will be required. (see Confidentiality: the long but not the short of it later in Bugg’s Boilerplates). Indeed for specific types of contracts where non-disclosure is essential (e.g. IP or M&A) obviously far more comprehensive agreements will be required. But remember always that such clauses or agreements are no replacement for a pro-active non-disclosure policy and set of procedures. 1. Confidential Information 1.1 Each Party undertakes that it shall not [at any time /at any time during the term of this Agreement, and for a period of [three] years after termination of this Agreement,] disclose to any person any information obtained from the other Party [or of any member of the group of companies to which the other Party belongs] any information concerning the business, activities, plans, affairs, customers, clients or suppliers of the other Party [or of any member of the group of companies to which the other Party belongs](Confidential Information), except as expressly permitted by clause 1.2. 1.2 Either Party may disclose the other Party’s Confidential Information  a) to its employees, officers, representatives, agents or advisers where such need to know such information for the purposes of carrying out the respective Party’s obligations under this Agreement provided that each Party shall arrange that its employees, officers, representatives, agents or advisers to whom it discloses the other Party’s Confidential Information comply with this clause 1 or, b) as may be required by applicable mandatory law, a court of competent jurisdiction or any governmental or regulatory authority, provided that the Party whose Confidential Information is to be disclosed shall be notified of such by the disclosing Party as soon as possible to allow the opportunity for such disclosure to be appealed against, prevented or delayed as the case may allow. 1.3 No Party shall use any other Party’s Confidential Information for any purpose other than to perform its obligations under this...

When should we be silent? Children used to be told that they should be seen but not heard, but approaches to child-rearing appear to have changed in the meantime.  In the business world some things never change. One of those things that hasn’t altered over the centuries is the need to be able to trust and rely on the fact that your business partner will not tell the world your confidential information. Confidentiality, or keeping information secret, is a necessary element of much commercial work and in many areas such as M&A, technology development, design or research, the safe-guarding of data is critical. From the very first contact with a potential partner it is often of supreme importance to ensure that any material or concepts revealed are treated in a confidential manner. Controlling your own information can give a company a competitive edge. One of the most common methods of seeking to preserve such secrecy is to use confidentiality agreements. But this has resulted in an over-reliance and an unjustified faith in such contractual obligations. In practical situations it is very risky to rely solely on an undertaking in a confidentiality clause or non-disclosure agreement. Such agreements may, in limited circumstances where the plaintiff can prove causation and actual damage, allow claims for  damages in the event of wrongful use or disclosure. In U.S. jurisdictions it may even be possible to avoid the difficulties of proving the damage by claiming liquidated damages (subject to a suitable clause to this effective being expressly agreed to). However, contractual damages are not a business solution even if they can be claimed successfully. They are certainly not preventative and once information is released, it usually cannot be called back in.  It may be a case of “closing the stable door after the horse has bolted.”  The damage has already been done.  We need to do more to prevent it occuring. Thus, in practical terms we should be using a much broader range of measures to protect against and deal with potential disclosure situations. We should not abandon the well-drafted non-disclosure agreement, but we need to supplement it with other procedures: 1. Clearly identify and record all confidential information and wherever possible label it as such. 2. Ensure that all employees are aware of the importance of such information and are trained in related procedures, policy and documentation. 3. Store all confidential information so that it is inaccessible to unauthorised persons. 4. Any communication of confidential information should only be by secure means and in an approved manner. 5. Recipients of confidential information must be expressly informed in each case that such information is confidential 6. From the very first contact and before any...

There are several potential benefits to contract parties selecting an arbitration clause to regulate possible disputes in a contract including matters of time, costs, the non-public nature of arbitration matters and the special expertise of arbitrators. But one of the fears sometimes perceived is the possible unavailability of any necessary (interim) injunctions or other measures to support arbitration proceedings and enforce any award. This fear is often not justified by the legal situation on the ground. In terms of recognition of arbitral decisions, the New York Convention of 1958 will apply in the vast majority of cases. This international treaty has be signed and ratified by over 152 countries, including the most industrialised nations (*1) and provides for the recognition of out-of-jurisdiction arbitral awards by local national courts. In relation to enforcement, courts in most countries will treat arbitral awards analogously to local court judgments. For example, in England the courts are granted statutory rights under the Arbitration Act 1996 to proceed to enforce arbitral decisions as if such were legal proceedings in a court of law. In particular, section 44(1) provides that Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings. Moreover, this power can also be applied to arbitral decisions originating outside of the court’s jurisdiction. Article 2(3) of the Act provides that the powers conferred under s.44 apply even if the seat of the arbitration is outside England and Wales or Northern Ireland and even where “no seat has been designated or determined.” It should be noted, however, that the Court has discretion to refuse to exercise such power if in its opinion the fact that the seat is outside the jurisdiction renders enforcement inappropriate in the circumstances. In addition to the above, s.37 of the Supreme Court Act also applies to arbitration proceedings. This provision states that the High Court may grant an injunction wherever it appears “to be just and convenient.” The result is the English courts have even recognised a power to issue a worldwide freezing order (WFO) requiring the “freezing” or seizure of bank accounts or other financial assets. This may also be done in the form of an interim injunction, pending a final decision in the main proceedings. The discretion of the court to issue a WFO is exercised generally only if all relevant circumstances and options have been considered, there is a risk of dissipation of assets, and there is a real prospect that the assets are located within the jurisdiction of the foreign court in...

In the recent case of Edmond de Rothschild Securities (UK) Ltd v Exillon Energy Plc in the Queen’s Bench Division (Commercial Court) [2014] EWHC 2165 (Comm) the court had to deal with the interpretation (construction) of contract language for the purpose of deciding when a “success fee” was due. The court held in this case that the correct construction of a contract for the provision of corporate advisory and strategy services meant that the service provider’s right to a success fee was not dependent upon the service provider being an effective cause of the “success” as defined in the contract. As long as the “success” was achieved, the service provider was entitled to the success fee. The crucial clause read as follows:  “In consideration for the services set out herein, the Company agrees to pay to [Rothschild] a fee payable as follows:a) a retainer of $50,000 per month… b) a success fee of $500,000, net of the retainers paid under (a) if a resolution to the issues posed by Worldview’s requisition has been achieved, such achievement being assessed because one or more of the following has occurred:    i. Worldview has indicated a willingness to cease hostilities;    ii. the prospect of future Worldview action is agreed between the Board and [Rothschild] to be remote;    iii. Worldview has reduced its shareholding in the Company to below 5%;    iv. a strategy has been developed that will be/can be implemented such that the negative impact of future Worldview action is agreed between the Board and [Rothschild] to be negligible; and    v. The Company has been able to successfully launch its proposed bond issue; …” The court decided that the above did not mean that the claimant had to be the effective cause of the listed events. This interpretation was supported by two main considerations. Firstly, it would have been very difficult, if not impossible, for the claimant to prove that its work was an effective cause of the sale of shares. Secondly, the reason for the sale did not matter to the other party: all that mattered was that the shares had been sold. The above was not regarded by the court as forming a contract of agency. In any event, the general principle that an agent’s right to commission is dependent on its being an effective cause of the success is subject to any special terms or other indications in the contract. The above construction, it was held, did not provide the claimant with an unfair “windfall” and it was not contrary to business common sense. Nor was there anything contrary to business common sense in entitling the claimant to a success fee in the circumstances. Thus, the court leaves open the...