ContractStore teams up with Artquest to offer contract templates for artists

ArtQuestContractStore is delighted to announce a partnering arrangement with Artquest. This is mainly intended to help artists who need contract documents to support them in their work.

To mark the occasion, together we have developed a Consignment Agreement for use by artists when sending their work to a gallery for exhibition and sale.

Quentin Matsys (1456/1466–1530) - The Yorck Project: 10.000 Meisterwerke der Malerei. DVD-ROM, 2002. ISBN 3936122202. Distributed by DIRECTMEDIA Publishing GmbH.

Art and law join together in our new agreement with Artquest. Quentin Massys’ Portrait of a Lawyer c. 1510.  Distributed by DIRECTMEDIA Publishing GmbH.

 

The Artist Consignment Agreement (document A246 in the ContractStore catalogue), is available as a free download for a limited period.

Also, Artquest subscribers can benefit from a 15% discount on all ContractStore templates. These include a Design Agreement, a Model Release Form, and Art Gallery – Artist Agreement among the 250 contract templates for sale from our website.

Are your Website Terms of Business ready for the new Consumer Regulations?

New regulations concerning the sale of goods and services to consumers come into effect in June. The great majority of businesses selling goods or services online as well as door step and other “off-premises” sales will be affected.

The Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013 come into effect on 13 June 2014. They replace the existing the Distance Selling Regulations and the Doorstep Regulations.

Although many of the existing regulations will continue, they have been updated in various ways and there are a number of changes that you will need to make to your terms and conditions.

So, be prepared to update your Terms of Business for online sales on your website as well as for off-premises sales. And remember, these Regulations apply to the sale of services as well as goods.

ContractStore’s Terms & Conditions for online sale of goods  (document A179) have been updated and are available to buy and download from our website.

Here are some of the key points in the new Regulations:

 Information     Lots of information must be given by the trader to the consumer before the contract is made.  This pre-contract information will be treated as information forming part of the contract. If this information is not provided, the consumer may not be bound by the contract.

Schedule 2 of the regulations details 24 separate bits of information to be provided. These include:

  • the main characteristics of the goods or services
  • the identity of the trader and his address and contact details
  • if the trader is selling on behalf of someone else, the address and identity of that other trader is also needed
  • the total price of the goods or services including taxes or, if this cannot be calculated in advance, an explanation of how it will be calculated
  • where applicable, any additional delivery charges or  other costs
  • where the contract is open ended or the consumer is paying a subscription, the total monthly or other regular payments
  • arrangements for payment, delivery, performance and timing
  • where there is a cancellation right, details concerning this
  • when applicable, the terms of any after sales service
  • the duration of the contract and if this is open ended, the conditions for terminating and the minimum contract period, if there is one.

Making the Contract.   In the case of online business, the information items in italics above are the minimum that the trader must provide ‘in a clear and prominent manner’ before the consumer places an order.

Also the website must have wording that ensures the consumer, when placing an order, explicitly acknowledges the obligation to pay for the goods or services being ordered.

Unless the trader complies with these requirements, the consumer is not bound by the contract..

Once an order is placed, the trader must confirm the contract within a reasonable time and before the delivery of goods or start of services.  email confirmation is acceptable.

Sales by Phone.  Anyone making a phone call to get a contract must at the beginning of the conversation identify the trader’s identity, the purpose of the call and the identity of any third party on whose behalf the call is being made.   

Delivery.     The contract will automatically contain an implied term requiring retailers to deliver goods and services without delay and in any event within 30 days from the contract date

 Risk.   Until goods come into the physical possession of the consumer, risk of loss or damage remains with the trader. This will not apply if the consumer arranges transportation with a carrier who has not been recommended by the trader.

Cancellation Rights.  Consumers will have 14 days in which to cancel a contract. This period replaces the existing period of 7 working days.  The 14 day period starts the day after the contract is made in the case of a service contract or contract for the supply of digital content online.

In the case of goods, the cancellation period ends at the end of 14 days after the day on which the last of the goods came into the physical possession of the consumer (or someone identified by him – e.g. the person to whom a gift is being delivered).

The Regulations contain a model cancellation form and consumers should be given the option to use this, but any clear statement of cancellation will be effective provided it is given within the 14 day period.

If the trader does not spell out the consumer’s cancellation rights, then the consumer has the right to cancel the contract at any time within 12 months. It is also an offence, punishable by a fine.

Refunds.   If the consumer cancels the contract and returns the goods, the trader must make a full refund within 14 days.  This includes the basic cost of delivery if the consumer paid for the goods to be delivered to him. Where there is no delivery of goods, the refund must be within 14 days after the trader is informed of the cancellation.

If the value of the goods has been reduced by the consumer’s handling, the trader can deduct an appropriate amount from the refund.

Return of Goods.  The trader is responsible for collecting the goods if:

  • he has offered to collect them or
  • the goods were delivered to the consumer’s home and they cannot, by their nature, normally be returned by post.

In other cases, the consumer is responsible for sending the goods back to the address specified by the trader. The consumer is responsible for the cost of returning goods unless either the trader has agreed to meet those costs or he failed to tell the consumer about the consumer bearing the cost in the information provided at the beginning.

Services in Cancellation Period.   The trader must not start services within the cancellation period unless he is asked to by the consumer. If services are then performed in full, the consumer’s cancellation right is lost. If services are partly performed and the consumer cancels within the 14 day period, the trader is entitled to payment on a proportionate basis for those services.

Supply of Digital Content.    Where there is a contract online for the supply of digital content, the trader should not supply the content before the end of the cancellation period unless the consumer has given express consent for early delivery and the consumer has acknowledged that the right to cancel the contract will not apply.  So, if you are selling downloads of music or maps, you need wording to ensure that the consumer agree to waive his cancellation rights as he goes through the buying process on your website.

Helpline Charges.    If it trader operates a helpline, this must not involve the consumer in phone charges above the basic rate. If it does, the trader is obliged to refund the extra cost to the consumer.

 Excluded Contracts.   These Regulations do not apply to certain contracts including: financial services and insurance; leases of property and contracts for the sale of land; contracts for construction of new buildings or conversion of existing buildings.

 Exclusion of Cancellation Rights.   The right to cancel a contract does not apply in some circumstances including:

  • goods that are tailor-made for the consumer or personalised in some other way;
  • goods that are liable to deteriorate or expire rapidly, such as fresh food;
  • goods or services where the price is dependent on fluctuations in the financial markets;
  • newspapers and magazines;
  • sealed goods which, after delivery, are unsealed and are no longer suitable for  return due to health or hygiene reasons – e.g. underwear;
  • audio or computer software that is supplied sealed and then unsealed after delivery;
  • goods that become inseparably mixed after delivery – e.g. sand mixed with cement.

For ContractStore’s template Terms of Business for the Sale of Goods Online click here

For more detailed information, the Regulations are available online and are quite easy to read.  Also there is Guidance published by the Department of Business Innovation & Skills.

 

 

What You Need to Know About Shareholder Agreements

If you are thinking of setting up a Company with Shareholders, be sure to have all rights and responsibilities agreed in writing.  A good contract will protect your interests and help you avoid disputes or crises.

You will need an agreement which sets out the basis on which shareholders will own, fund and manage the business and which will have a procedure for dealing with the sale of shares and for resolving differences of opinion.

Don't play Russian Roulette with your business - get everything agreed in writing

Don’t play Russian Roulette with your business – get everything agreed in writing

When a Limited Company is formed in the UK, it will usually have the model Articles of Association that are available on the Companies House website.  The Articles contain the constitution of the company – but for most people setting up a company this is not enough.

A shareholders agreement in the UK is a private contract and, unlike the Articles of Association, it is not available for anyone to access at Companies House.

Sometimes a shareholders agreement will be signed before the company is formed, but it can also come later.

Key Points to Look For in a Shareholders Agreement:

  • Parties to the Agreement

In a private company with between two and ten shareholders, it is usual for all of them to be parties to the agreement.  But this is not essential.

If, for example there are three people each with 25% of the shares and 10 other shareholders with only a small nominal shareholding, the agreement might be made between only the three main shareholders.

  •  Capital, Shares and Funding

The Agreement will normally set out the number of shares to be taken up by each shareholder, the amount payable, and whether the shares carry any special voting rights.  If shares are to be issued in return for non-cash assets – e.g. technical know-how – this will be specified.

The agreement may also stipulate that additional funding that is needed will be provided by loans from shareholders proportionate to their shareholdings; or else that the company will seek funding form an external source such as a bank.

In order to have some certainty, sometimes a business plan indicating what capital will be required, who will contribute it, and when it will be required, will be added to the shareholders’ agreement for a new company.

  • Management

Management of a company is generally undertaken through the board of directors; it is therefore important that the shareholders agree how many directors there are to be, who the first directors are, how they are to be appointed and removed and whether the holders of different classes of shares have any particular power to appoint them.

It is usual for each of the principal shareholders to have the right to appoint at least one director to the board and, where a shareholder is an individual he or she may also be a director.

Once appointed, directors may be given authority to determine how often they meet, the quorum for meetings, how their decisions are made and other matters relating to matters such as the conduct of the meetings.

Alternatively, the shareholders may wish to decide these matters themselves and set out the rules in the shareholders’ agreement.  This is especially likely to be the case when, for example, there is one major shareholder who wants to be sure that only resolutions that have his vote will be passed by the board or at a shareholders’ meeting.

Another aspect of management which the shareholders should address at the outset is the extent of the directors’ powers; the shareholders may wish to reserve certain important matters to a decision of the shareholders in general meeting of the Company.

These reserved matters may cover, for example:

  • the issue of new shares,
  • borrowing by the company above agreed limits
  • any change in the nature of the company’s business,
  • capital expenditure above an agreed amount,
  • hiring and firing of senior staff
  • joint ventures with other companies.

Specific day to day management issues may also be covered – especially if there are some special arrangements, for example where one of the shareholders provides office premises for the company.

  • Transfer of Shares

The shareholders will usually want to prevent other shareholders from disposing of their shares to third parties without having first offered them to existing shareholders.  This is normally accompanied by wording that requires the shares to be valued by an independent accountant if the sale price is not agreed.

The shareholders may also wish to provide that in certain circumstances, e.g. the death or permanent incapacity of a shareholder, that shareholder’s shares are to be offered to the other shareholders.   In the UK, it is usual for tax reasons to give shareholders the option, but not the obligation, to acquire shares of a deceased shareholder.

  • Dividend Policy

Shareholders often provide in the shareholders’ Agreement for:

  • the means of calculating net profits;
  • a percentage of the net profits that must be distributed annually;
  • any restrictions on distribution of net profits – e.g. no distribution until certain loans have been repaid.
  • Confidentiality

The agreement will usually contain a restriction on any shareholder disclosing confidential information about the company to outsiders, not only during the agreement but also after it comes to an end.

  • Default

If a shareholder become bankrupt or commits some serious breach , the agreement will usually provide for him/her to be bought out at a price fixed by the agreement.   If a shareholder who is forced out under this clause is a director of the Company, he should also be required to resign as a director.

  • Restriction on Competition

It is common practice to prevent shareholders from having an interest in a competing business and to prevent any shareholder who sells his shares to set up in competition or poach any of the company’s staff for a specified period.

  • Management Disputes

When, on issues of importance, the shareholders (either through their directors on the board or in general meeting) cannot agree, what occurs is what is known as a deadlock.  It is often agreed by the shareholders at the outset what will be done in such a situation.

A solution that is often adopted is for a shareholder to offer to sell his shares or purchase the other shareholders’ shares at a particular price.   These solutions are sometimes known as “Russian Roulette” or “Texas Shootout” provisions.

ContractStore has several useful downloads for shareholders:

Parent Company Guarantees

Parent Company Guarantee templateIt has become common practice for a client in the UK construction industry to require its contractor to provide security. Performance Bonds and Parent Company Guarantees are two forms of contract to handle this requirement.

Especially in times of uncertainty, anyone awarding a valuable contract will need to think about the financial and technical capacity of the contractor, not least in the building industry where insolvency is all too common.

Partly in consequence of this risk, it has become common practice for a client in the UK construction industry to require its contractor to provide security – in the form of a performance bond and, especially where the company entering into the contract has limited assets but is part of a larger group, a guarantee from its parent company.

These requirements are usually included as a term in the contract between the client and the contractor and it is sometimes a condition of receiving payment under the contract that the performance bond and parent company guarantee are in place.

Who Will Provide the Guarantee?

It is usual for the ultimate holding company of the contractor to be asked for the guarantee, but this is not always the case.

For example, if there is an intermediate company within a group which has sufficient assets, the client might be willing to accept such a company. Moreover, sometimes this is to the advantage of the beneficiary, i.e. the client.

For example, if a contracting company incorporated in England is ultimately owned by a US corporation, the UK client needs to consider whether it may have difficulties in enforcing the guarantee if for any reason the parent company does not pay when called upon to do so. The chances are that legal proceedings in the United States could be necessary. So, if in the group that owns the English contracting company, there is an English “parent” that has adequate assets, the guarantee might best be obtained from that English parent.

Formation of a Contract

A parent company guarantee creates a contract between the client and the guarantor. It will specify the guarantor’s duties and usually have an end date – e.g. the date of completion of the project, after which it ceases to have any effect. The guarantor will specify when it comes into effect and what are the guarantor’s obligations – e.g. to take over the project from its subsidiary if the subsidiary becomes insolvent or ceases to perform its contract.

Often there is a wide indemnity clause under which the guarantor indemnifies the client against all losses it suffers as a result of the subsidiary’s default. If you represent a parent company being asked to provide a guarantee, you should try to ensure that your liability is no greater than that of your subsidiary under its contract with the client. In other words, if the contractor’s liability is limited to a fixed amount, this should apply to the guarantee. And if the contractor is owed money by the client, it can be useful for the guarantee to give the guarantor the right to withhold an equivalent amount from what it has to pay the client under its guarantee. Without appropriate wording, the guarantor can find itself liable for more than its subsidiary.

When is a Guarantee Not a Guarantee?

Parent company guarantees do, of course, come with the risk that if the contractor company is in trouble, its parent may be in trouble as well, so a call on the guarantor can turn out to be worth less than it seemed. Which only goes to underline the fact that due diligence is needed before any major contract is signed.

For a balanced form of PCG: http://www.contractstore.com/B149-parent-company-guarantee

For a performance bond template: http://www.contractstore.com/B146-bond

Are Your Gym Membership Terms Illegal?

In a High Court case earlier this year, a sports club was taken to court by the OFT (Office of Fair Trading) and the judge held that certain terms were unfair. These included:
• Terms restricting the right of a member to terminate a 12 month or longer period even if there are good reasons for wanting to terminate – e.g. ill health
• Requiring full payment of fees for the minimum membership period if the contract is ended early
• Requiring payment even where the member had a genuine dispute about the quality of the gym.
• Threatening to report a non-paying member to the credit reference agencies in certain circumstances

The OFT has been keeping a close eye on sports clubs over the years and they have even issued a long report entitled ‘Guidance on unfair terms in health and fitness club agreements’, with warnings against using various clauses including those that try to exclude any liability of the club for death or personal injury.

This case is a recent example of the OFT flexing their muscles with a sports organisation that they felt had overstepped the mark. For the full judgment click here.

ContractStore now offers a Sports Club Membership Agreement and, as always, we have been careful to ensure our terms are both user-friendly and fair to both parties.

Bribery Act UK: Is Your Business Prepared?

New UK legislation coming into force on July 1st 2011, requires companies to have “adequate procedures” to prevent corruption – i.e. a Code of Conduct – in order to avoid the risk of an offence under the new law.

ContractStore and GovRisk (The International Governance & Risk Institute) have teamed up to produce a template Code of Conduct to aid SMEs.

About the New Laws

On July 1st 2011, the Bribery Act comes into force in the UK. This new legislation is broad-ranging in its language and it covers corruption occurring abroad as well as at home. It is essential for companies to get a policy in place to show they are complying and avoid prosecution.

But many businesses have been slow to adopt appropriate policies and procedures, as they have yet to fully appreciate the seriousness of the Act’s implications.

New Offences

Under the Bribery Act 2011 there are four new offences:

  • Bribery of another person
  • Accepting a bribe
  • Bribing a foreign official
  • Failing to prevent bribery

Bribery Act: Key Facts

  • Companies as well as individuals can be prosecuted
  • The only defence to the new offence of failing to prevent bribery is to show you have “adequate procedures” in place to prevent such corruption
  • A company can be prosecuted for bribery in the UK and overseas, and for bribery by employees as well as third parties appointed by your organisation

Founder of ContractStore.com, Giles Dixon says:

“Every business should have a Code of Conduct in place which is compliant with the Act and the Guidance issued by the UK Government. Training of personnel is another important aspect of the compliance procedure.

“We are in the business of helping companies to keep legal costs down and we are concerned that this far-reaching legislation could expose many to prosecution. To support the UK SMEs that are our main customer base we’ve teamed up with GovRisk training providers to make available online a ready-to-use template Code of Conduct.

“Like all our documents, it’s clearly written in plain English, editable in Word and comes with explanatory notes.

“ContractStore’s model Code can be adapted to cater for particular circumstances, as the corruption risks for a company vary depending on the size and nature of the business and the areas of the world in which they operate, as well as the extent of your relationships with others – joint venture partners, agents, Government clients etc.

“We want to make it as easy as possible for UK businesses to get this issue sorted out quickly and easily.”

Prepared for ContractStore.com in conjunction with the GovRisk, this Code of Conduct is available for a limited period at a special introductory price of Ł27 (excludingVAT).

It can be downloaded online directly from www.contractstore.com. Specific guidance and tailoring services are also available.

The International Governance and Risk Institute (GovRisk) are holding an afternoon seminar and drinks reception on the “UK Bribery Act and its Impact on Your Business” on July 14th in London’s Canary Wharf from 4pm. The seminar will feature some of best experts in the field of Anti-Corruption and a drinks reception will follow. Registration is on a first come, first served basis as places are limited.

Do You Need a Partnership Agreement?

If you are setting up a business, you may be wondering if you should have a Partnership Agreement, and what it would include.

The answer to this is that without it, there can be uncertainties as to the relationship between the partners and how the partnership should be run. For example, in the absence of a partnership agreement, on the death of a partner, the partnership has to be dissolved. Unless there are only two partners, this might not be in the interests of the surviving partners who wish to keep the partnership going.

Similarly, in the absence of any agreement to the contrary, the partners have the right to share equally in the capital and profits of the business.

Problems which can be encountered with the general law can be avoided by a properly drafted partnership Agreement, which can set out clear rules concerning such matters as capital and profit shares, drawings on account of profit, management and decision making, permitted partnership expenses, retirement and expulsion or death of a partner (and the financial consequences of retirement, death or expulsion).

Definition of Partnership

Under the English Partnership Act 1890 (“PA”) partnership is defined as ‘the relation that subsists between persons carrying on a business in common with a view to profit’.

Formalities

There are no specific legal requirements that govern the formation of a partnership. The PA governs the relationship unless there is a partnership agreement.

Partnership is a private matter and there is no public register that contains information concerning partnerships. (This is not true of limited liability partnerships which were introduced in 2002 in the UK).

Legal Status of Partnerships

A partnership does not have a separate legal personality apart from its members in a way that a limited company does. As a consequence, the partners are jointly and severally liable for the obligations of the partnership i.e. each partner can be sued for the full amount of any liability of the partnership. There is no limit on liability.

Duties of Partners

These arise from the partnership agreement, where there is one. In addition, partners are agents of the firm and their other partners. They also have a fiduciary relationship to each other – e.g. a duty to account and disclose information concerning their activities in relation to the partnership.

Authority of Partners

Each partner has the power to bind his partners and make them liable on business transactions which are carried out in the name of the partnership. (This power can be limited internally but if the internal agreement is breached, the partnership might still have a liability to a third party who entered into a contract in the belief that he was contracting with the partnership).

Partnership Contracts

Partnership Agreement for Two Partners

Partnership Agreement for Three Partners

Partnership Agreement for Four or Five Partners

On Demand Performance Bonds – How to make them less of a threat

Contractors tend to be wary of  ‘on demand’ performance bonds as there is usually no protection against the bond being called unfairly. The courts have generally refused to prevent a bond from being called except in the case of proven fraud.

But a new case this month, Simon Carves v. Ensus UK,  suggests that if the underlying contract contains restrictions on the client’s right to call the bond, then the English courts will grant an injunction preventing payment.   For more details, see this article on Giles Dixon’s website.

Do It Yourself: Terms & Conditions e-kit shows you how

Business Terms & Conditions e-kit

Business Terms & Conditions e-kit

ContractStore has collaborated with Lawpack to launch a new guide: the Business Terms and Conditions e-kit.

Available to download online as an e-kit, this 50 page book includes guidance on the key terms that a business should include in its Terms of Business including topics such as

  • price and payment
  • delivery
  • recourse for faulty goods
  • force majeure
  • limits of liability
  • termination.

There is also advice on debt recovery and a range of other subjects including how to get the best out of your lawyer.

The e-kit contains a number of sample documents including Terms & Conditions for supplying goods and services.

Written by three solicitors who specialize in commercial law, including ContractStore’s founder, Giles Dixon, this invaluable guide is priced at £19.99 (£17.50 plus VAT).

The Business Terms and Conditions e-kit is available online at http://www.contractstore.com/business-terms-and-conditions-ekit

Travis Perkins Building Contracts into Business

We’ve partnered up with Travis Perkins to bring construction companies the great news that they can wave goodbye to high legal costs. Travis Perkins is a leading supplier to the UK building and construction industry, offering more than 100,000 product lines to professionals and self-builders.

The new partnership between Travis Perkins and ContractStore.com focuses on a range of low-cost specialist contracts for the construction industry, including Terms & Conditions, Collateral Warranties, and contracts for Supply of Works and Services.

A Start-Up Pack for Builders is also available, containing the key document templates for running a construction business.

Although written by expert lawyers, these documents come without the hefty High Street price tag, providing large organisations through to self employed contractors with the opportunity to be legally protected as they prepare for the upturn.

With a recent survey by Close Invoice Finance revealing that almost a quarter of SMEs in the South East have to wait for payment over 31 days after the agreed terms, Giles Dixon, founder of ContractStore.com believes that many in the construction industry, particularly self-employed contractors and smaller outfits, could be exposing themselves to bad debt and crippling cash flow issues in 2010 by failing to have adequate contracts and terms in place.

“The recession may be over but it will be some time before we start to see improvements in day to day business. Stabilising cash flow is a huge issue for most businesses at the moment and absolutely paramount for those working in construction and isn’t helped when customers can easily default without consequence.

“This new partnership with Travis Perkins is designed to help those in the industry to obtain adequate legal protection and minimise risk of disruption to the business for an affordable price,” says Dixon.

Contact us if you’d like to know more or browse our construction documents.

New December Regulation Surprise for Small Businesses

Costly legal fees are history with new virtual service for Construction Industry

The construction industry is waving goodbye to expensive legal fees thanks to a new partnership that delivers professionally drafted legal documents online for a fraction of the price found on the High Street.

The new partnership between Travis Perkins and ContractStore.com brings a range of low-cost specialist contracts for the construction industry, including Terms & Conditions, Collateral Warranties, and contracts for Supply of Works and Services.

A Start-Up Pack for Builders is also available, with the key document templates for running a construction business. Although written by expert lawyers, these documents come without the hefty High Street price tag, providing large organisations through to self employed contractors with the opportunity to be legally protected as they prepare for the upturn.

With a recent survey by Close Invoice Finance revealing that almost a quarter of SMEs in the South East have to wait for payment over 31 days after the agreed terms, Giles Dixon, founder of ContractStore.com believes that many in the construction industry, particularly self-employed contractors and smaller outfits, could be exposing themselves to bad debt and crippling cash flow issues in 2010 by failing to have adequate contracts and terms in place.

The recession may be over but it will be some time before we start to see improvements in day to day business. Stabilising cash flow is a huge issue for most businesses at the moment and absolutely paramount for those working in construction and isn’t helped when customers can easily default without consequence. This new partnership with Travis Perkins is designed to help those in the industry to obtain adequate legal protection and minimise risk of disruption to the business for an affordable price,” says Dixon.

Firms can save even more money too, as if documents are ordered via www.contractstore.com/travisperkins, a further 15% discount will be added.