Category Archives: Legal practice

Using the right words in contracts: knowing your 3Rs

learningThe 3 ‘R’s – for readers who have not come across this expression – are the basic subjects one first learns at school: reading, [w]riting and [a]rithmetic.

In this article, the 3Rs have a different meaning. We discuss 3 words used in contract law that start with an ‘r’.  They are technical, legal expressions, and many of us get by without using them at all, in contracts or elsewhere. Yet they feature in standard textbooks on contract law and in case law. The larger point is whether it is necessary to understand and use legal terms of art in contracts.

flynnThe 3 words are: revoke, repudiate and rescind. While they have other meanings in everyday life (eg if the authorities revoke – take away – your driving licence for drinking alcohol or speeding), these verbs have specific meanings in contract law. Like the Three Musketeers, they have a colleague who might be one of them, yet is slightly apart.  The noble Gascon of the contract world is (in noun form) restitution. Their colleagues in the corps of musketeers – rectification, release and replevin – will not be discussed in this article. Nor will their decrepit former colleague, rescous, which should not be confused with a type of wheat grain popular in North African cooking.

This article was prompted partly by a question that Ken Adams raised yesterday on Twitter:

adamsKen has followed up his question with a blog posting, titled simply Revoke. He suggests that there is no need to use the word revoke in relation to an IP licence, and that terminate is preferable.  IP Draughts agrees, but on technical questions of law he always keeps an open mind.  Property law has developed in strange ways over centuries (just think of the many types of legal and equitable interest that have been recognised) and there may be some point lurking in the shadows of old case law that he has not considered.

Whenever he hears any of the 3 R-words in a contract law context, IP Draughts has to concentrate to remember what they mean and to make sure he is not mixing them up.  Think of this article as remedial therapy for IP Draughts.  By forcing himself to articulate the different meanings, they may finally sink into his head. References below are to the leading tome, Chitty on Contracts, Volume 1, General Principles (30th edition, 2008).

Revoke

licence revokedOne of the traditional requirements for a binding contract is that one party makes an offer and the other accepts it.  A party can usually withdraw an offer before it is accepted.  The technical term for withdrawing an offer to enter into a contract is to revoke the offer (Chitty, 2-060).  Looking at the word revoke, it appears to have an etymology that suggests another word, “recall”.

This is different to terminating a contract that is already in existence.

Another sense of revoke is where a right or privilege that has been granted is subsequently withdrawn.  A driving licence may be withdrawn by the court for motoring offences such as speeding.  Some people use the term revoke for the termination of an IP licence, as the article linked above mentions.  As IP licences typically form part of contracts, this usage could be said to form part of contract law, but it is not conventional to refer to revoking a contract, and Chitty makes no mention of this usage.

Repudiate

In fact, there seem to be a pair of words with very similar meanings in contract law: repudiate and renounce.

IP Draughts is familiar with the expression “repudiatory breach” where a party acts in such a way as to make clear that he does not intend to perform his obligations under the contract, and the other party is entitled to “accept” this repudiation and terminate the contract.

Chitty seems to prefer the term renunciation for this type of breach (Chitty, 24-018) although the word repudiation appears in the discussion of several types of termination, eg in relation to contracts with minors (Chitty 8-031).

Rescind

voidThe correct use of the term rescind is to describe a situation where the contract is treated as never having come into existence, and not the situation where a contract is terminated part-way through its ‘life’.

For example, if a contract is terminated by acceptance of a repudiatory breach, this is sometimes inaccurately described as a rescission (Chitty 24-027).

Rescission from the start of the contract (ab initio) may occur if a party is induced to enter into the contract by (for example) misrepresentation or mistake (Chitty 6-103).  If rescission occurs after the contract has started, it will have retroactive effect to cancel the contract (Chitty 6-106).

Discussion

The 3 R-words have acquired different meanings in English contract law.  The differences in meaning are quite subtle.  A breaching party may repudiate the contract, but termination only occurs if the other party accepts the repudiation.  If a party is induced to enter into a contract by a misrepresentation, he may be entitled to rescind the contract. Contracts cannot generally be revoked, but an offer to enter into one can be revoked before the other party accepts.  There is also a suggestion that a licence can be revoked.

And this is just what the terms probably mean in one country’s development of the common law.  There is no certainty that these terms have identical meanings in other common law systems. It seems even less likely that there is an identical meaning in civil code systems, and if the words are translated into other languages, the subtleties of meaning may be completely lost.

rwordIP Draughts view is that it is better to avoid using terms such as rescind, revoke and repudiate in a contract, and instead to state specifically what rights and remedies and party has, eg the right to terminate for breach.  If termination is to be retroactive, this should be specifically stated. By using legal expressions of this kind, you may point a court to a particular understanding, based on case law, which may or may not work in the context of the contract under discussion.  Or you may find that the court is not familiar with the meaning you intended, particularly if the case is litigated outside your home jurisdiction. Or you may even use the wrong expression anyway – easy to do when they are so similar.

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How do we ensure that professionals act ethically?

ethicsLast week, IP Draughts was interviewed by a researcher.  The researcher was part of a team at the University of Birmingham who are conducting a research project titled Virtues, Values and Decision-Making in Three Professions in the UK in the 21st Century.

According to the project website,”the research is designed to build a contemporary picture of the place and influence of virtues and values in the education, training and practice of doctors, lawyers, and teachers”.

In past centuries, and perhaps today, professional standards and values were inculcated through apprenticeships and other on-the-job training, and reinforced by self-regulation and peer pressure.  Self-regulation dates back to the medieval guild system, and can be seen today in the activities of bodies as the Inns of Court, Bar Council, Law Society, Solicitors Regulation Authority (SRA), the various Royal Colleges that train medical doctors, and the General Medical Council.

Formal dinner in the Inner Temple dining hall

Formal dinner in the Inner Temple dining hall

Traces of this approach can been seen in the requirement for would-be barristers to attend a certain number of formal dinners at their Inn of Court before qualifying.  IP Draughts originally qualified as a barrister.  To do so he had to pass the Bar Finals Course, and provide references from two persons of good character.  He also had to eat a number of dinners at the Inner Temple – from memory it was a dozen.  This was supposed to be part of a process of soaking up the ethos of the Bar through interaction with one’s elders and betters.  Perhaps it was IP Draughts’ fault for being obtuse, but very little ethical instruction seemed to be in evidence.  The main lesson that he learnt (a valuable one for life) was that drinking too much cheap port, even if it is “free”, is not a good idea.  It gives you a terrible hangover the next day.

That particular practice may have outlived its usefulness, but the general idea of learning how to be a good professional through interaction with senior colleagues is a good one.  IP Draughts greatly appreciates the time spent on him by his early mentors, including Peter Clark and David Griffith-Jones (barristers who are both now judges), Dennis Jeffrey (a chartered accountant), and various solicitor partners at Bristows, including Philip Westmacott, Edward Nodder and Sally Field.

paulineIn IP Draughts’ view, ethics are best learnt by example.  The researcher who interviewed IP Draughts asked him whether there should be formal courses in ethics.  When he heard this question, IP Draughts couldn’t stop an image coming into his mind of some scenes from a TV comedy series called League of Gentlemen.  In those scenes, a character called Pauline teaches unemployed people how to look for a job and conduct themselves at interviews.  See this horribly funny example on YouTube.  If formal courses in ethics became compulsory, would Pauline be teaching them?

Political pressure in recent years has driven the professions towards independent regulation of their activities.  To an extent, IP Draughts agrees with this trend, as long as it is not taken too far.  The SRA needs to keep working at finding the right balance between sensible and effective regulation and not being a right royal pain in the arse.  The compulsory, annual diversity survey that IP Draughts must conduct with his staff is an example in the latter category.

An extreme example of the “new” approach can be seen in the periodic comments from Elisabeth Davies, the Chairman of the Consumer Panel of the Legal Services Board.  Ms Davies seems to view all current regulation as pandering to the vested interests of lawyers, and she wants to sweep it all away and replace it with a totally independent system.  IP Draughts is not sure why the profession is paying for this body, whose primary function seems to be to issue policy proposals and press releases that bad-mouth the legal profession at every opportunity.  Fortunately, the Government seems to take the panel’s rantings with a pinch of salt.

ProofBefore taking part in the interview with the researcher, IP Draughts completed an online questionnaire.  The questions were more subtle than this, but were along in the lines of:

A. You have discovered that your nephew, who is a solicitor in your firm, has been raiding the client account to pay off his gambling debts.  You repay the correct amount of money into the client account plus interest.  Do you report your nephew to:

  1. The client
  2. The accounts committee of your firm’s partnership
  3. The full partnership of your firm
  4. The Solicitors Regulation Authority
  5. The police?

B. Do you take the action referred to in question A because:

  1. It is the ethical thing to do
  2. You are required to do so by the rules
  3. It is someone else’s responsibility to decide what action to take
  4. Your nephew has committed a criminal offence
  5. Your client would want you to take this action?

IP Draughts doesn’t recall what answers he gave (honest!) but will be interested to see any survey results that the research team publishes.

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UK transactional IP lawyers 2013 – the IP Draughts table

top leagueFor the third year running, we offer the IP Draughts league table of UK transactional IP lawyers.  This table is based on a very simple premise: make a list of the people who are ranked in both of the following two tables:

  1. IAM Patent 1000′s current list of UK patent licensing lawyers; and
  2. Chambers Directory’s current list (published today; click on “ranked lawyers” and scroll down to “transactional”) of UK transactional life sciences lawyers.

Inevitably there is an arbitrary element in any list of this kind, and it misses out some fine IP lawyers that IP Draughts respects.  But it does include most of the people that IP Draughts would regard as leading IP transactional lawyers in the UK, and it has the merit that two sets of researchers have independently identified these individuals as specialists.

In alphabetical order, this year’s list is as follows:

Laura Anderson (Bristows LLP)

Mark Anderson (Anderson Law LLP)

Malcolm Bates (Taylor Wessing LLP)

Richard Binns (Simmons & Simmons LLP)

Allistair Booth (Pinsent Masons LLP)

Patrick Duxbury (Wragge & Co LLP)

Jim Ford (Allen & Overy LLP)

Michael Gavey (Simmons & Simmons LLP)

Sarah Hanson (CMS Cameron McKenna LLP)

Gary Howes (Fasken Martineau LLP)

Colleen Keck (Allen & Overy LLP)

Mark Lubbock (Ashurst LLP)

Nicola Maguire (Reed Smith LLP)

Daniel Pavin (Covington & Burling LLP)

Stephen M Reese (Olswang)

Chris Shelley (Penningtons Manches LLP)

Sally Shorthose (Bird & Bird LLP)

John Wilkinson (Reed Smith LLP)

making listsA couple of names have dropped out since last year, probably due to changes in personal circumstances.  There are no new names compared with last year.

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Ten things I have learnt recently…

…or been reminded of, by recent work experiences.

  1. US clients are interested in the 2012 case, Oracle v UsedSoft, in which the Court of Justice of the European Union confirmed that a licensee of cjeusoftware, where the licence is for an unlimited period, has the right to sell their licence, and the purchaser can use the software, despite any terms in the licence agreement to the contrary. Result: much head scratching to understand exactly how far this case affects different models of software licensing.
  2. The approach of French lawyers in relation to confidentiality of communications between lawyers is very different to that of English avocatlawyers.  It seems that, in France, a lawyer may not copy to his client a letter that he has received from the other party’s lawyer.  Result: effective communication with one’s clients becomes unnecessarily difficult.
  3. If there is a way of signing an agreement incorrectly, parties will find it, like moths attracted to a flame.  Last week, we received two originals of a contract that had been signed by the other party.  The signature blocks in the contract clearly indicated that the party’s signature should be witnessed.  The other party’s lawyer had designed the signature blocks.  But the other party signed without witnessing, and without the other party’s lawyer apparently noticing the omission when they sent us the agreements for signing.  Result: extra work.
  4. Large US corporations that acquire UK companies sometimes use standard employment contracts for their UK employees that unthinkingly bolt together US practice with UK practice, and with no real attempt to take into account UK employment or IP laws.  Result: conflicting terms and contractual chaos.
  5. When parties negotiate an 11,000 word Memorandum of Understanding without full legal input and then want the MOU to be converted into a full agreement, there is a lot of work involved in clarifying the parties’ intentions, removing inconsistencies and cleaning up the text.  Result: headaches and additional legal cost.
  6. When international groups of companies involve a dedicated procurement department in the purchase of complex software, negotiations can become very protracted if the procurement department has no authority to agree anything and must refer all issues of substance to the operating company.  Result: slower negotiations and additional legal cost.
  7. referralWork referrals from other professionals (eg firms of patent attorneys) can be very hit and miss.  Two recent projects from the same firm, involving different clients: the first went very smoothly and the client and intermediary were very pleased with our advice; the second, where the client didn’t know what they wanted, was a nightmare throughout and bills are outstanding six months after the work was done.
  8. Lawyers and accountants based in tax havens have a vested interest in persuading a client to move their operations to the tax haven.  Much as one wants to trust other professionals, one also needs to keep a weather eye out for whether their advice is entirely impartial and in the client’s best interests.
  9. Some UK tax barristers take an unhelpful approach in refusing to advise not my jobon whether a proposed move from the UK to a tax haven is workable under both English law and the law of the tax haven.  By limiting themselves to English law they are not providing a useful service and drive work to the big international firms of accountants.
  10. Australian solicitors, at least in IP Draughts’ experience, are generally of a high standard.  Anderson Law is delighted that Mario Subramaniam joined the firm this month as an associate.  He graduated and initially qualified as a solicitor in Australia before requalifying as an English solicitor.

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