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Commercial law update In house lawyers forum – autumn 2013
1. when will ‘good faith’ be implied
(updated)?
2. what amounts to a ‘material’ or
‘repudiatory’ breach (updated)?
3. what does ‘nemo dat quod non habet’
now mean for users of software or IP?
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3 cases
• Compass Group v Mid Essex (2013) CA
• TSG Building Services v South Anglia
(2013) CFI
• Yam Seng v International Trade Corp
(2013) CFI
• remember Compass Group v Mid Essex
(CFI)? (Ketchup and Chocolate Mousse)
1. no implied duty of good faith
2. if ‘good faith’ is a contract term (as here
– then must act accordingly so
termination, without discussion could be
a breach)
• Compass Group v Mid Essex (2013) Court
of appeal
– ‘co-operate in good faith’ is binding
– but only to matters of discretion (not
absolute contractual remedies)
• TSG Building Services v South Anglia
(2013) EWHC
• “work together in trust, fairness and
mutual partnership…”
• could well be pervasive but would not
affect right to terminate for convenience
• Yam Seng v International Trade Corp
(2013) CFI
• ‘good faith’
• can be implied where necessary to make
sense of a distribution agreement (false
information about products, undercutting
distributor’s prices)
• no implied duty of ‘good faith’
• an obligation of ‘good faith’ can be
implied to make sense of the contract
• if implied it can be pervasive (i.e.
attach to any matter of discretion in the
contract)
• but it won’t override a clear contractual
right (e.g. to terminate)
… repudiatory / material breach
• SSSL v Scottish Building Society (2013)
CFI (Scotland)
• ‘material breach’ - lack of consent
… repudiatory / material breach
• introduction of customers to new
savings scheme
• obligation to use reasonable endeavours
to comply with DPA
• lack of consent from customers to use of
personal data (because SBS couldn’t
legitimately use that data)
… repudiatory / material breach
• Telford Homes v Ampurius [2013] EWCA
Civ 577
• repudiatory breach – time for
determining if breach is repudiatory is
when innocent party seeks to terminate
• actual breach (as well as anticipatory
breach) may be cured, losing right to
terminate (can still sue for damages)
• VLM Holdings v Ravensworth Digital
Services Ltd 2013 (CFI)
A Head Licensor (VLMH)
I
B Licensor (VLMUK)
I
C Licensee (S)
• (*you can’t give what you haven’t got)
• why?
– licensor and head licensor – same
directors
– head licensor ‘consented’ to grant of
licence
– licensee didn’t know it was a sub-licence
– head licensor was therefore undisclosed
principal, licensor was agent (licence
was actually between head licensor and
licensee)
• be clear
– who owns the IP – (is this a licence or sub
licence?)
– that licensee is not your agent (make
explicit)
– whether sub-licences can be granted
– what terms sub-licences should have
(survive or not) – include example
licence?
• check who owns the IP
– if you need greater comfort – ensure that
the head licensee has consented to the
sub-licence
– insert an express provision for the sub-
licence to continue (and ideally ensure
the head licensor has agreed this)
• be careful with ‘good faith’ and other
‘fluff’ (it can also be used against you)
• if you must agree to it – try to limit its
scope within the agreement
• good faith can be implied by the court
where necessary
• but if you’re up against a clear
contractual right, ‘good faith’ won’t
help you
• a failure to get consent (for data
protection purposes) may be a material
breach
• if you want to terminate as a result of
the breach of the person you’re
contracting with – do it quickly (or at
least reserve your rights)
• exclude agency in licence agreements
(unless you’re the licensee) & limit
sublicensee rights
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