Intellectual Property and Confidential Information
Intellectual property may be a relevant feature in many commercial contracts. An entity may develop its own IP such as software or technology and license it to third-party users. The scope of intellectual property and the terms of consent to its use should be set out.
There may be an acknowledgement of ownership of intellectual property in the supplier/seller. The terms of the licence will generally be limited to the purpose and extent of the contract.
The seller may specify or be entitled to specify materials that it may deliver in accordance with the relevant services. The agreement may confirm the supplier’s retention of all intellectual property rights in its materials. The customer may be granted a non-exclusive, non-transferable license for limited use as is necessary for the enjoyment of the services provided.
The buyer may be required to reproduce a copyright notice and legends of ownership on relevant copy material, acknowledging the supplier’s ownership of the relevant rights.
Where third party consent, usually by a licence, is required for the use of software hardware or other products, the customer or supplier may have obligations to make or cooperate in the application and to seek or obtain the relevant consent.
The buyer may indemnify the seller and its group or related companies against claims and damages arising from failure to obtain the relevant consents.
Provisions may be made for confidentiality on the seller’s part where the buyer learns or encounters the buyer’s confidential information. The issues usually arise in relation to the seller’s / service provider’s information. These clauses are usually mutual. The parties may wish to ensure that the agreement itself is kept confidential.
Confidential information may be disclosed or may arise in the course of a sale or supply contract. The contract may define confidential information. Commonly there will be an undertaking on the part of the recipient to maintain confidential information and not to divulge it to a third-party.
Where the information enters the public domain without the fault of the other party or ceases to have a confidential characteristic, the restriction is usually lifted.
Contracts commonly provide that at the end of any relevant term, articles, products and data of a confidential nature must be returned.
Whole Contract Clause
In a consumer contract, terms which seek to exclude or restrict liability for a misrepresentation may be potentially unfair. In a commercial contract, they may be more readily incorporated and apply
An entire agreement clause commonly inserted in commercial agreements. The effect of the clause is that the agreement comprises the entire agreement and that no other terms and conditions may be argued to apply.
It is commonly accompanied by a term to the effect that the party or parties have not relied on any verbal or other statement and have relied, for example, exclusively on their own knowledge. The purpose is to avoid claims that other contractual terms apply or that any representations may have legal effect so as to negate the contract.
An entire agreement clause would not by itself exclude a claim based on misrepresentation. It has been held in some cases that the particular clause might be wide enough to encompass a collateral contract but not misrepresentation. The wording of the clause is critical.
It is likely to be against public policy to purport to exclude liability for a deliberate or reckless false statement. This is expressly so in UK legislation.
No Partnership / Agency/ Joint Venture
It may be confirmed for the removal of doubt, that nothing in the agreement is to be interpreted as a partnership or a joint venture between the parties. It may be confirmed that the parties are not each other’s agents and that they have no authority to enter engagements or incur expenses on behalf of the other.
This type of clause may be appropriate in some circumstances, in order to prevent the risk that a relationship of agency or partnership might be otherwise deemed to arise. This would create fiduciary obligations and an inability to deal at arm’s length. It may also lead to the possibility of one party making the other party liable under contractual arrangements with third parties.
Assignment and Third Parties
The privity of contract rules applies in Irish Law. Unlike the position in the United Kingdom and most US States, they have not been reformed. It is a basic principle that the benefit of a contract and its burden may be taken by a party to the contract only. Correspondingly a person who is not a party to the contract may not be subject to burdens and obligations under it.
Exclusion and limitation clauses do not necessarily benefit third-parties. The courts have developed case law which has sought to extend exemption and limitation clauses in bills of lading (embodying contracts for sea carriage) to third-parties for whom they were expressed to be intended to apply.
The agreement may provide or confirm that the rights of the parties may not be assigned or transferred without the prior consent of the other. The seller may reserve the right to subcontract its obligations. It may be confirmed that the seller need not perform its obligations itself, personally.
Costs and Expenses
It may be confirmed that the costs and expenses in relation to entering the agreement and the performance of its obligations are each to be borne by the respective parties themselves, without indemnity from the other.
In particular taxes and other liabilities arising from the sale contract are to be borne by the appropriate parties. Capital income and profits taxes are borne by the seller.
In the absence of specific clause, the price is deemed to be VAT exclusive, so that a VAT charging clause is required to provide for the obligation to pay VAT. Most commercial purchasers can recover VAT paid to a trader.
It may be provided that if any provision of the agreement is illegal or unenforceable in whole or in part, whether by statute or common law, that the agreement is to be valid and enforceable as to the remainder of it.
The common law principle of severance applies only where the remainder of the agreement can stand meaningfully. The courts will not rewrite agreements for parties. Such clauses seek to broaden the common law position and save an agreement that might otherwise be found wholly void.
One or both parties may require a provision that the other’s obligations are to be “time of the essence”. This means that if the other does not perform on or by the due date, that the “innocent” party may terminate its obligations and claim for damages.
The Statute of Limitations applies a six-year time limit to the commencement of a claim for breach of contract. Breach of contract occurs at the time of breach whether or not it is known to the other party. Unlike the position in the UK, there is no general discoverability rule in the Republic of Ireland.
The Statute of Limitations period may be deferred if and to the extent the action is based on the defendant’s fraud or if there has been deliberate concealment. To a limited extent, a mistake may be a basis for extending the statutory period.
Acknowledgment and part-payment recommence the statute. The acknowledgement must be in writing. It is a matter of interpretation in the circumstances as to whether or not there is an acknowledgement. See generally the articles on the statute of limitations.
In principle, the parties may contract to agree a shorter limitation period. In many consumer contracts, this may be an unfair contract term and thereby void. In a commercial contract, the clause may bar or extinguish a claim after the defined period. In some cases, depending on the obligations thereby limited, it may be valid only to the extent that it is fair and reasonable.
The contract should provide for the proper law of the contract. This is the law in accordance with which the contract is to be interpreted and applied. In a commercial contract, the parties may generally designate any applicable law they choose. The seller may seek to provide that the law of its jurisdiction applies to the contract.
Contracts will commonly specify the state whose courts will have jurisdiction. In a commercial contract, a choice of jurisdiction (forum) is usually enforceable.
In consumer contract, the state of the residence of the consumer must generally govern the contract and be the state in which enforcement action must be taken.
A provision may be made for reference of disputes to arbitration. It may be provided that if the dispute is not resolved within a set number of working days of negotiations, that either party may refer the dispute to arbitration. It is necessary to provide a mechanism for the appointment of the arbitrator with a provision for appointment of an arbitrator in default of agreement.
Arbitration clauses require that disputes within their scope be referred to arbitration and not to court. Where the clause is in place, and it applies to the dispute, the parties may be precluded from going to court and may be required to go through arbitration.
It is necessary for the arbitration clause to provide a mechanism for the appointment of the arbitrator. Commonly, contracts refer to standard arbitration terms and conditions. They may be incorporated by reference to trade terms and conditions. The courts seek to uphold mechanisms for appointment of an arbitrator, where it is incomplete.
Reference may be made to a trade organisation or other arbitration rules. Provision may be made for the appointment of an arbitrator by an appropriate independent officer, such as the President of the particular association.
Provision may also be made for dispute resolution by expert resolution or by mediation. Provision may be made for the appointment of an independent technical expert in relation to the determination of particular disputed matters which require and are appropriate to expert resolution. Typically, provision is made for the appointment, criteria, costs and that its decision shall be binding on the parties, at least in the absence of a court determination that he has acted unreasonably.
Rights or Remedies
It is commonly provided that set off of mutual liability may be allowed in a wide range of circumstances. The effect of such provisions is usually to expand upon the default set off position at common law which applies in narrow circumstances only.
It may be provided that the agreement provides for the full rights and remedies of the parties and that there are no additional rights or remedies at law or in equity. The exercise of one right or remedy may be expressed not to hinder, prejudice or prevent the future exercise of another right. The purpose of these clauses is to confirm that agreement provides for the whole of the relationship between the parties and that the “default” common law rights and remedies are not intended to co-exist.
It is commonly provided that any waiver or forbearance or failure by a party to insist on due performance of the agreement whether deliberately or by accident or inadvertence is not to be interpreted as a waiver, release or abandonment of the relevant party’s rights to future performance or further performance. In the absence of this confirmation, a waiver of right on one occasion may be interpreted as a wider waiver of the right for all purposes under the agreement.
Provision is usually made in relation to the effective service of notices. This may be critical in the context of key steps under the agreement such as termination of the agreement and the assertion and restriction of rights. Usually, the procedure must be strictly adhered to. Formal notice is usually required. The issue also arises in the context of ordinary communications for ongoing purposes under the contract.
The giving of actual notice may be difficult to prove. The party may change its address or organisational structure. It may actively resist service. Contracts commonly provide that notices and communications are deemed properly served if they are sent to a specified physical or email address. Contracts commonly provide that notices and communications are deemed to be given upon physical delivery or posting to premises, transmission by email by electronic communication, et cetera.
The clause will commonly declare when the communication is deemed to be received, commonly on the next working day, provided for example, that it is sent in a prepaid envelope directed to a particular address or to the last notified address.
Signature is not generally a requirement for a valid contract. There are some classes of contract where the contract itself or a note /memorandum of it must be in writing and signed.
A signature acts to authenticate the agreement of the party who signs it. It is very difficult to deny being bound to a document which has been signed by the party concerned.
The Electronic Commerce legislation allows for both digital and de facto electronic signatures. Digital signatures have not become as widespread as originally contemplated at the turn of the century. They are used when encryption or a higher standard of security is required.
Documents may be signed or authenticated in the case of an ordinary contract by email or other process defined as sufficient to constitute acceptance.
References and Sources
Encyclopaedia of Forms and Precedents (5th Edition) Vol 7(2)
Drafting and Negotiating Commercial Contracts (2016) 5th Ed Mark Anderson, Victor Warner