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Friday 4 October 2013

MH Corporate

Are you ready to be bound?

 The recent case of Newbury v Sun Microsystems [2013] EWHC 2180 highlights the importance of including the words ‘subject to contract’ if you do not intend proposed terms of a contract to become binding.

 Against the background of negotiations to settle a dispute, on 03 June 2013, Sun Microsystems’ solicitors wrote the following to Newbury’s solicitors:

 “Our client is willing to settle the entire proceedings by paying the Claimant [Newbury] within 14 days of accepting this offer, the sum of £601,464.98 . . . such settlement to be recorded in a suitably worded agreement. This offer is open for acceptance until 5pm this evening . . .”

The same day, Newbury’s solicitors wrote a letter of acceptance:

 “We thank you for your letter dated 03 June 2013. We are instructed that the Claimant [Newbury] accepts the terms of your client’s offer . . .We will forward a draft agreement for your approval on Tuesday 04 June.”

 A dispute arose about the form and substance of ‘such settlement to be recorded in a suitably worded agreement’. In particular, Sun Microsystems wanted the ‘suitably worded agreement’ to both modify and supplement the terms set out in their 03 June 2013 letter.

 

It’s good to have faith

 The recent case of Yam Seng PTE Ltd (“Yam Seng”) v International Trade Corporation Ltd (“ITC”) [2013] EWHC 111 (QB) provides a little hope for those seeking to rely on an implied duty to act in good faith in a commercial contract.

 It is generally accepted that English courts will uphold an express term of a contract which requires the parties to act in good faith towards one another. However, under English law there is no general duty to perform contracts in good faith where such a duty is not written down in the contract.

 The Yam Seng case concerned a distribution agreement for fragrances and toiletries bearing the brand name “Manchester United”. ITC granted Yam Seng the exclusive right to distribute the products in Hong Kong, Macau and parts of mainland China. Yam Seng and ITC were two companies each being controlled by one main individual.

 

Is your business ready for the B2C VAT changes?

 In a little over 13 months, businesses that sell e-services (telecoms, broadcasting and “electronically supplied services”) to non-business consumers within the European Union (B2C) will experience a dramatic change in VAT.

 On 1 January 2015, legislation comes into force which will change (i) the place of supply and (ii) the country of taxation of e-services, from the country in which the supplier is established to the country in which the consumer is resident.

 

Sleeping Partners and National Insurance Contributions (NICs)

On 4 April 2013, HMRC announced an adjustment in its view of the status of sleeping partners and inactive limited partners regarding National Insurance Contributions (“NICs”).

Historically, sleeping and inactive limited partners who took no active part in the running of the business, and simply acted as investors who sought to make a return on their investments, were not liable for Class 2 and Class 4 NICs as their income was treated as unearned income. HMRC now considers both sleeping partners and inactive limited partners to be liable (and to have been liable in the past) for:

  • Class 2 NICs as ‘gainfully employed’ self-employed earners; and
  • Class 4 NICs in respect of their taxable profits.

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