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One-sided contract term of the day (3): grossing-up of withholding tax

Tax can be interesting! This golden oldie tackles a perennial commercial and drafting issue in licence agreements – who takes the risk of witholding tax?

IP Draughts

We continue our series highlighting IP Draughts’ “favourite” one-sided provisions in contracts.  These provisions are often found in contracts where there is an imbalance of power between the parties, and where the party with the power (let us call him the “Patron”) seeks to reduce a sometimes theoretical risk by imposing it on the other party (the “Supplicant”).

Today’s one-sided term is:

If any withholding tax is levied on the Payments, then Supplicant shall increase the sums paid to Patron so that the amount received by Patron after the withholding tax is deducted is the full amount Patron would have received if no withholding or deduction had been made.

This term differs from some of the others in the series in a number of ways.  First, it is focussed on an IP issue, or rather an IP tax issue – withholding tax.  Some of the other terms in the series…

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As you were! Duty of good faith not implied into English law contract.

Too much focus on personalities in this golden oldie, says Mr Pettifog. And no-one should criticise the saintly Baroness Hale, incoming President of the UK Supreme Court!

IP Draughts

baconIt is a while since IP Draughts has seen the English Court of Appeal dismiss so comprehensively the contractual analysis of a High Court judge.

Nearly a year ago, IP Draughts reported on a case in the English High Court,  Compass Group UK and Ireland Limited (trading as Medirest) v Mid Essex Hospital Services NHS Trust [2012]  EWHC 781 (QB), which was heard before Mr Justice Cranston.

The decision in the High Court

chocmousseThe case was fascinating for the light it threw on how a hospital procurement manager behaved in a “challenging” manner with a supplier of catering services.  The contract included a provision for “service failure points” – effectively fines – for non-compliance with service standards.  According to Cranston J, the procurement manager deducted an “absurd” amount for minor failures.  For allowing a chocolate mousse to be in a fridge one day after its use-by date, the supplier was…

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What is an IP Strategist?

IP Draughts was recently involved in a discussion about the communications gap that can exist between an IT service provider and its corporate client, and whether an intermediary should be involved who is fluent in the language of IT and of the boardroom. A similar question seems to arise in relation to some patent service providers and their corporate clients, and where the gap is filled by the IP Strategist. This brought to mind this golden oldie. Read on…

IP Draughts

IP Draughts can’t seem to stop stumbling across internet discussions of a question that is puzzling many IP lawyers: what, exactly, is an IP Strategist?

The question is brought into focus by the fact that there is an international league table of IP Strategists, which forms part of the IAM250 series. In its first year, this table comprised the members of the International IP Strategists Association, or INTIPSA.

Whether or not they are strategic, IP lawyers tend to be competitive, sceptical and analytical.  This tugs them in different directions over a league table like this one.  Should they try to join it, and claim kudos from belonging to such a rare and exclusive club, or should they point out the flaws in the concept of a group that is distinct from, but overlaps with, IP lawyers?

IP Strategists advise on commercial strategy in relation to IP assets. In view…

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Formalities for a binding contract: a conventional steer?

IP Draughts can’t resist re-blogging this golden oldie, about writing your contract on the side of a cow (OK, US readers, it’s not a steer; we don’t have steers in the UK so how is IP Draughts supposed to know the difference? Tsk!)

Nowadays, he would recommend parties consult the Law Society guidance on executing contracts by electronic means.

IP Draughts

How many people remember the case of a cheque written on the side of a cow?  The fictitious case of Board of Inland Revenue v Haddock was one of the more famous of A P Herbert‘s Misleading Cases in the Common Law, which first appeared in Punch magazine in (probably) the 1920s.  It concerned the question of whether a cheque written on the side of a cow was a valid payment of an income tax bill.

The case has been cited in real court cases, including Victor Chandler International Ltd v Commissioners of Customs and Excise [1999] EWHC Ch 214 (16th July, 1999) in which Lightman J held that, for the purposes of certain gaming legislation: “neither a person nor A.P. Herbert’s ‘negotiable cow’ …can constitute a document.”

Cheques are, of course, a different type of legal instrument from contracts.  Both types have some features in common –…

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