24 July 2019

Contract Law – the Basics

By Patrick Ibbotson

Contract law forms the basis of everything we do at Naomi Korn Associates, whether it’s an agreement with a client or consultant or advising on underpinning sound Intellectual Property Rights and Data Protection management through robust contracts. Contract know-how, what they are, what they mean and developing sound contract negotiation skills, is essential to copyright and data protection compliance, and also provides one of the best ways to protect and optimise valuable IP rights.

It was therefore important for me to gain a greater understanding of how they work and luckily for me we have one of the best in the business, Professor Charles Oppenheim, as Senior Consultant at Naomi Korn Associates who was up for teaching me!

These are some of things I learnt. If you are new to contract law, then you might find the outline of the fundamental principles below an interesting read!

What is a contract? A contract is an exchange of promises. It can be to do or not to do something and is enforceable in a court of law. It doesn’t have to be written, but preferably it is, so it’s on record what was agreed. It can be inferred from the actions of the parties involved, but there is room for doubt if nothing is in writing, so such inferred contracts should be avoided whenever possible. Contracts are involved in everyday transactions such as buying a chocolate bar in a shop and booking a holiday.

What is in a contract?

The following will be present implicitly or explicitly in all contracts:

Terms/ Implied Terms – Each term gives rise to an obligation. For example I will drive you from A to B for £25. Terms written down are known as Express terms but terms can be implied for example taking a taxi but not asking for the charge. At the end of the journey you will be charged according to distance and time taken.

Conditions – In order for it to be a legally binding contract, it must have:

Offer and acceptance – ideally in writing, but can be inferred by the actions of the parties. This relates to a clearly defined offer and an unequivocal intention to accept as worded. This means that the exact nature of the ‘work’ or ‘services’ being provided as part of a contract should be as explicit as possible.
Consideration – is the exchange of one thing for another. Typically, money changes hands, but it can be other things e.g. a gift in kind whereby a museum would receive advertising in exchange for the right to be associated with an exhibition through sponsorship.
Intention to create legal relations – both parties intend into entering a legal relationship. This to be verified in writing or clearly implied from their actions
Legal capacity – i.e. the parties entering the contract are legally competent e.g. are over 18 years of age.

Representations and Warranties – are both guarantees from one party to the other regarding the condition of what is being transferred. The difference being that representations happen before a contract (i.e. are a reason for entering into a contract) and warranties are stated within contracts. Warranties are offered explicitly or implicitly alongside products purchased in our daily lives. When it comes to intellectual property rights, the creator of a work would often be required to provide a warranty that the work is totally their creation and would not infringe the copyright of any other party or be illegal in any way, including breaking data protection law or containing libellous statements.

There is so much to learn in contract law. One of my key takeaways was that every word matters in a contract because language is used as an exact tool.

If you want to take your contract law knowledge to the next step, we provide in-house contract law training for staff or 1 to 1 Skype learning. Get in touch with me if you are interested at patrick@naomikorn.com