Pannone x IHL conference Q&A
Thank you to all who attended our annual IHL conference on 5 November 2024 hosted in partnership with BCL Legal Recruitment. To those who were unable to join us, we run this conference annually every Autumn and we look forward to seeing you at a future event.
We welcomed 115 in house lawyers this year which is our biggest attendance yet over the last 12 years of running the event. We are keen to keep growing these sessions! We’ve collated a few interesting Q&As that arose during the day which we hope are helpful and give you a flavour of the variety of discussions from this year’s event.
If there is anything you consider we can help with, have any further questions or want to highlight a topic of interest for next year, please drop a line to paul.jonson@pannonecorporate.com, sarah.bazaraa@pannonecorporate.com or emma.haymes@pannonecorporate.com.
One
Context:
In discussing the recent Supreme Court decision in the case of RTI Ltd v MUR Shipping BV [2024] UKSC 18 relating to force majeure and reasonable endeavours, the clause under consideration stated that neither party was liable for loss relating to a force majeure event if it could not be “overcome by reasonable endeavours”. The issue was that RTI wanted to make payment in Euros rather than US Dollars due to sanctions which prevented payment. The Court of Appeal held that force majeure could be overcome in a practical way, by MUR accepting payment in another currency. The Supreme Court disagreed, finding that MUR was not obliged to accept payment in any currency other than USD. The question was:
Question:
The Court of Appeal decision seems practical compared to the Supreme Court’s decision which is very to the letter of the law. Is there a benefit in anticipating events such as these by including wording to the effect that reasonable endeavours will include payment in another currency?
Answer:
The Supreme Court made the point that the parties were free to agree whatever commercial terms they wished, and that force majeure is not to be used as a mechanism for getting around this. If payment in another currency was acceptable, it should, and would have, been stipulated in the agreement. As such, it is essential to try and cover such eventualities through precise drafting. Had there been words to the effect that payment in an alternative currency would be acceptable, the dispute would not have arisen, or at least would have come to a very different conclusion.
Two
Context:
When considering risk and liability in negotiations of commercial contracts, and in particular, what happens if there is a bad bargain, and things fall apart after an agreement has been signed the question was:
Question:
If a company finds itself in the position of a bad bargain, but with little to fall back on such as an unequal bargaining power etc, are you really completely deprived of a remedy altogether?
Answer:
This is a very fact specific question and, the will largely depend on all of the surrounding circumstances. However, unless the fall back of the Unfair Contract Terms Act 1977 applies, and the contract is clear enough, there is a very real chance the courts will uphold the ‘bad bargain’.
In the case of Retirement Villages Developments Ltd v Punch Partnerships (PTL) Ltd [2022] EWHC 65 (Ch) the High Court judge held that the role of the court was “to ascertain the objective meaning of the language which the parties have chosen in which to express their agreement”. To the extent that “even if [the words lead to a commercially absurd result] …I am bound to apply those words” and it is not the role of the courts to “re-write a bad bargain”.
It is best in these situations, to rely on any “forward-looking” commercial bargaining power, consider if there is more creative leverage that can be used and / or non-monetary resolutions to resolve the dispute.
Three
Context:
In discussing NDAs, their practical application and any disputes surrounding such agreements.
Question:
In practice, how often are NDAs broken, how often are they enforced and what are the consequences of breaking an NDA?
Answer:
NDAs are most likely to be enforced when the potential transaction between the parties does not proceed. The disclosing party will then ask the recipient to confirm that the confidential information has been returned or destroyed in accordance with the terms of the NDA. It is rarer to see NDAs enforced following a breach but this is in itself an argument for putting for them in place as it means the parties are clear on their contractual rights and obligations pursuant to the NDA.
Four
Context:
In discussions regarding the use of corporate NDAs.
Question:
What is the usual term of a corporate NDA?
Answer:
We would generally expect the duration of an NDA to be 2 years from the date of the NDA unless the transaction to which the NDA relates completes, at which point the terms of the NDA shall lapse. Something to look out for is where the Seller has not included a definitive conclusion to the NDA - this should be clarified to ensure that the Buyer has certainty around the term of the NDA and that the confidentiality obligations placed on the Buyer / Investor do not continue indefinitely.
Five
Context:
In discussions regarding the use of corporate NDAs.
Question:
Is it usual practice for indemnities to be given by a buyer in an NDA and which restrictive covenants in a corporate NDA are considered to be market practice?
Answer:
Indemnities should be strongly resisted, given that any potential liability for the buyer could be wide ranging. In our experience, UK based sellers do not generally push for the inclusion of an indemnity clause, but it is definitely something to look out for where there is a US or European seller or target company. If they are accepted, they should be carefully and narrowly drafted.
In many circumstances, non-compete clause will be resisted, particularly where this is contrary to the spirit of the NDA and, in some cases, the buyer and the seller may already be competing with one another (and may even be unaware that they are doing so). Instead, what may be more acceptable is a non-solicitation clause, whereby the buyer is restricted from recruiting or soliciting certain (usually senior) employees of the seller for a certain amount of time. Should a buyer wish to soften the terms of this clause, they may look to carve out any offers of employment already made prior to the NDA, or any bona fide offer made by a member of staff that would have been unaware of any prospective deal.
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The principle of without prejudice privilege is a cornerstone of legal negotiation. However, like most legal principles, relying on the without prejudice label is not without its risks. Understanding the limits, nuances, and application of without prejudice correspondence is crucial to ensuring that this valuable legal protection does not backfire when you least expect it.
In the IHL seat
The principle of without prejudice privilege is a cornerstone of legal negotiation. However, like most legal principles, relying on the without prejudice label is not without its risks. Understanding the limits, nuances, and application of without prejudice correspondence is crucial to ensuring that this valuable legal protection does not backfire when you least expect it.
Our Pannone x IHL is designed to bring you the latest news and legal developments relevant to in-house lawyers. If there are any areas you would like more information on or if you have any questions or feedback, please do not hesitate to let us know via our feedback form or get in touch with any member of our team.
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