Company & Commercial

Commercial Law

Frequently Asked Questions on Commercial Law

Q How can we protect our business against disputes with customers, and protect ourselves in case something goes wrong?

A Ensure you have properly drafted Terms of Business, and that they are incorporated into the contracts you make with your customers.

There are legal restrictions on the extent you can exclude or limit your liability by contract, especially when dealing with consumers. Contracts with consumers really now need to be drafted in plain English.

If you cannot get your customer to sign your Terms of Business, then make sure that the last document which passes between you when the contract is actually made states that the contract is subject to your Terms of Business. Sending them out with an invoice is too late. If you do business online, make the customer click a button to accept your Terms of Business.

Q Do we need to register under the Data Protection Act?

A If you feel you need to ask the question, the answer is probably yes. "Data controllers", who determine the purposes for which, and the manner in which, any personal data (relating to a living individual who can be identified) are, or are to be, processed, generally have to notify the Information Commissioner under the Act. However, there are a number of exceptions, including for data controllers who only process personal data for staff administration (including payroll), for advertising, marketing and public relations (of their own business) or for accounts and records. Some not for profit organisations are also exempt, as are individuals who process personal data for personal, family or household affairs (including recreational purposes) are also exempt. Detailed guidance can be obtained from the Information Commissioner.

When processing personal data, you must also comply with the data protection principles set out in the Act. In particular, you must only collect personal data that is relevant for your stated purposes, and use it only for those purposes. If you wish to disclose it to a third party, for marketing or other purposes, you must obtain the written consent of each data subject. Again, further guidance can be obtained from the Information Commissioner.

Q We have sales agents who aren't performing. How do we get rid of them?

A Given them notice under their agency agreements, but be careful to establish that they are not employees and bear in mind that compensation will be payable to them under the Commercial Agents (Council Directive) Regulations 1993, in addition to the commission due to them for the notice period. Whether or not you have written agency agreements, their terms will be subject to the Regulations, which provide amongst other things for minimum periods of notice.

Q We have a strong brand and a good business model for exploiting it. Is franchising a good way of doing this?

A Yes, it can be. If you can clearly define your business format, in terms of identifiable intellectual property (including know-how as well as trade marks) and state it in an operating manual which can be licensed, then franchising can be a way to expand your business whilst minimising the cost and risk. However, franchisees will need to be selected carefully, and a properly drafted franchise agreement, having regard to competition law implications, is essential.

Q I've lent money to a company, and am worried it might get into financial difficulties. What can I do to protect myself?

A You should consider taking security for the loan. A typical solution is to take a fixed and floating charge over the company's assets. However, it is likely that the company will have already given such a charge to its bank, which will have priority over your charge, and there are a number of potential legal problems, particularly with floating charges, which will need to be addressed. You will also need to register your charge at Companies House within 21 days of signing it. You should carefully consider what assets are available, over which you can take security, and seek personal guarantees from the directors where possible, ideally backed by charges over their personal assets. It is better to agree such security before making a loan, as you are then in a stronger negotiating position.

Q Our supplier says we mustn't resell their goods at less than their recommended retail prices, or they'll stop supplying us. Can they do this?

A No, this is a clear breach of competition law. If they persist, consider reporting them to the Office of Fair Trading.

Q My partner and I have carried on business as a partnership for several years but we never signed a written partnership agreement. We've now fallen out. How do we end the partnership, and who keeps the customers?

A If you have really not agreed anything about how the partnership is to be terminated, then it is what is known as a "partnership at will" and either of you can bring it to an end simply by informing the other verbally. You will then be free to compete for the customers. Such a situation is generally undesirable, and it is best where possible to negotiate a formal dissolution agreement, which can deal with all these matters.