We recently met with a successful company that uses another firm of employment lawyers on retainer. They considered that these lawyers were slightly weak in the commercial understanding of the company as a business. This was illustrated when the lawyers were trying to apply the law to real situations in the company’s business and how that could impact on them. The company commented that it was not just seeking ‘dry law’, but to really understand how it will affect them in real terms.
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Jewellery Direct Supply
A COUPLE OF SHORT NOTES ON COMMERCIAL LEGAL MATTERS THAT ARE WELL WORTH READING ...
1. Court clarifies what is ‘reasonable notice’ to terminate a contract
Hamsard 3147 Ltd (t/a Mini Mode Childrenswear) v Boots UK Ltd [2013] EWHC 3251 (Ch), 31 October 2013
The High Court has listed the factors to consider when deciding what is ‘reasonable notice’ for terminating a contract. The decision doesn’t create new law, but it will be useful when interpreting a ‘reasonable notice’ clause, or when a contract is silent on termination.
Hamsard had contracted to supply children’s clothes to Boots. The contract wasn’t in writing and the trading relationship had been inherited from previous arrangements between other parties. Hamsard ran into financial problems and Boots terminated the contract on 9 months’ notice. Both parties accepted that the contract could be terminated on reasonable notice, but Hamsard argued that ‘reasonable’ meant 18 months (referring back to a previous agreement).
The court set out five factors for deciding what is ‘reasonable’, summarising previous case-law:
- it will always depend on the facts – so other cases are of limited help;
- the circumstances and practices of the parties’ trade may be relevant;
- it should be judged at the time notice is given;
- the circumstances at the time of the contract are also relevant, to show ‘the common purpose of the parties’; and
- it will depend on how formal the relationship is.
Here, the contract was informal, short-term, and constantly changing. 9 months was reasonable.
Although this case is useful guidance when deciding on a reasonable notice period, there’s no substitute for including clear contractual wording on termination rights. The dispute also shows how important it is to document any trading relationship your business inherits - eg following corporate restructurings.
2. New employment rules on changing service providers
The new TUPE regulations came into force on 31 January 2014. This is part of the government’s commitment to cut employment law red tape.
The regulations introduce some important changes:
- for a TUPE service provision change to take place, post-transfer activities must be ‘fundamentally the same as the activities carried out previously’;
- pre-transfer collective consultation (where the transferee, with the transferor’s consent, meaningfully consults with the transferring employees) can count towards collective redundancy consultation obligations; and
- changing an employee’s workplace location after a transfer can be an ‘economic, technical or organisational’ reason and won’t automatically be unfair.
BIS has published guidance on TUPE generally, including the new regulations (the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014)
This article contains general advice and comments only and therefore specific legal advice should be taken before reliance is placed upon it in any particular circumstances.
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