ADR

In the resolution of a civil dispute anyone is entitled to a fair hearing within a reasonable time, at a reasonable cost, and with appropriate independent input to ensure fairness. There are, however, circumstances in which options other than litigation may be more cost effective, quicker, or flexible, while still resulting in a fair outcome. All those involved in the litigation process need to have a proper understanding of the ADR methods available.

The term ‘alternative dispute resolution’ has no agreed definition, but clearly the phrase is used to cover the full range of alternatives to litigation potentially available to resolve a civil dispute. Whilst there have always been alternative ways of resolving disputes, the importance of ADR in the context of Litigation is a relatively recent development. ADR is now seen as an essential part of the process by which parties seek to resolve their
disputes by way of litigation, as much as an alternative process in itself.

The planning of ADR is as important as the planning of the other parts of the litigation process and requires knowledge both of the detail of ADR methods and of factors affecting tactical decisions in ADR.

There are a number of alternative dispute resolution mechanisms available to parties involved in a dispute. There are a number of ADR options available (a) negotiation which is a non-binding ADR process without third party intervention (b) mediation; executive tribunal; conciliation; stakeholder dialogue; early neutral evaluation is non-binding ADR processes with third party intervention and (c) expert determination; adjudication; Dispute Review Board; arbitration and Med-Arb these are binding ADR processes.
Negotiation is the most flexible and informal of the dispute resolution methods. Parties attempt to reach agreement on matters in dispute without the assistance of a third party. Discussions usually proceed on a without prejudice basis. If the negotiations do not succeed to settle the matter, the parties’ rights are not prejudiced.

Mediation is the process whereby parties, with the assistance of neutral third party (the mediator), identify the issues in dispute, explore the options for resolution and attempt to reach agreement. It is a voluntary, non-binding and private form of dispute resolution. The parties retain control of the decision on whether or not to settle and on what terms.

There are different styles of mediation, but the most common in the UK is facilitative mediation, in which, unlike a judge or arbitrator, the mediator will not decide the case on its merits but will work to facilitate agreement between the parties.

A representative of each party makes a formal presentation of his best case to a panel comprised of senior executives for the disputing parties and an independent chairperson. The panel then retires to discuss the dispute and the chairperson normally acts as a mediator between the senior executives. The entire process is private, confidential and without prejudice.

Conciliation is similar to mediation except that, usually, the third party will actively assist the parties to settle the dispute. The term is widely used to describe the facilitated settlement discussions that occur in the employment arena. It is also the term used in Europe to describe the function performed by judges when they hold
settlement conferences with the parties in an attempt to assist them to reach a settlement of their dispute.

This process is primarily encountered in environmental disputes. A series of meetings takes place with stakeholders/interest groups to facilitate decision-making, with the hope of avoiding future disputes.

The parties appoint an independent person to provide a non-binding opinion on the merits which evaluates the facts, evidence and law relating to a particular issue, or the whole case. The rationale is that, once armed with the opinion, the parties will be able to negotiate an outcome, with or without the assistance of a third party.

Expert determination is an informal process that produces a binding decision. An expert is appointed by the parties to determine an issue, usually of a technical nature. As an expert’s decision is an evaluation, this approach is treated as having different legal characteristics to an arbitration award.

Adjudication has been used as a method for dispute resolution in the construction industry for decades, and since the introduction of the Housing Grants, Construction and Regeneration Act 1996, parties to certain construction contracts have had a statutory right to refer disputes to adjudication.

An adjudicator usually provides a decision on disputes as they arise during the course of a contract. Typically, the decision of an adjudicator
has interim binding effect; that is, the decision is binding pending agreement of the parties altering its effect or a reference of a dispute to arbitration or litigation for final determination.

A dispute review board is a project specific adjudication process. A panel (usually of three neutrals) is appointed at the start of a project. The panel visits the site of the project, usually three or four times a year, and deals with disputes by providing an interim binding decision (like adjudication). The parties can challenge board decisions via arbitration or litigation. The board can have a preventative effect on disputes.

Arbitration is an alternative to litigation as a means of resolving disputes. It is based on the parties’ agreement: all parties must agree to submit the dispute in question to arbitration. Arbitration is a private forum in which an independent arbitrator makes an award, acting in a judicial fashion, to finalise the dispute. The
outcome (the award) is final and binding on the parties. The arbitrator focuses on the issues (fact or law) presented by the parties. The matter is referred to arbitration for determination where it is satisfied that the dispute arises under a contractual arbitration agreement (section 9, Arbitration Act 1996). The arbitrator cannot meet with each party in private.

Med-arb (or arb-med) is when mediation is combined with arbitration to resolve a dispute. In med-arb, if mediation fails in whole or on any issue, the parties may agree that the mediator becomes an arbitrator and issues a final and binding award on the outstanding matters.

Owllegal are well versed in all areas of ADR, and can assist clients in both creating the right to utilise ADR, and then using the ADR process to reduce, the time in both money and man hours to reach conclusions to business disputes.

Acknowledgement: Thomson Reuters online resource Practical Law

NOT LEGAL ADVICE: Information provided in this Blog, is for information purposes only. It is not and should not be taken as legal advice. You should not relay on or take or fail to take any action based upon this information. Never disregard taking legal advice or delay in seeking legal advice because of something you have read in this blog, or on this website. Ian Randall is an Attorney & Counsellor at Law (NY), with 25 years of Corporate and Commercial experience in several jurisdictions. To see how Owllegal could help you, please visit; www.owllegal.org or email Ian Directly, his email address is ian@owllegal.org.

Oral Contracts

A contract is a promise or set of promises, the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a parties’ obligation. It is an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law.

In this fast paced world of doing business, parties sometimes disregard the formalities of a written contract, and conduct business with a handshake, or oral contract. Generally, these oral contracts are enforceable! Obviously not every statement made between parties can be considered as a promise, agreement or contract, however, it is important to identify when a valid contract can be said to have been formed.

For a contract to exist the following must be present; offer, acceptance, consideration, intention to create legal relations and capacity to contract. It is also a fundamental principle of contact that there must be a meeting of minds, the parties must agree on certain terms before there can be a valid, legal and enforceable contract. Where the parties say different things at different times, there is no meeting of minds, they are not in agreement on specific terms and so cannot be said to have a created a contract between them.

An offer is an unequivocal expression of readiness to contract on terms specified by the offeror (person making the offering) which if accepted by the offeree (person to whom the offer is made) will give rise to a binding contract. Thus, it is by acceptance that an offer becomes converted to a contract.

Acceptance is an unconditional (without conditions or limitations) approval communicated by the offeree to the offeror. It must be unqualified and on the terms of the offer before acceptance can create a binding contract. When acceptance is qualified or varies from the terms of the offer, it becomes a counter-offer and no longer an acceptance that can lead to a valid contract.

Another essential element of a valid contract is consideration, (except where the agreement is under seal). Consideration has been defined as the inducement to contract; the cause, motive, price or impelling influence which induces a contracting party to enter into a contract; the reason or material cause for a contract; some right, interest or profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.

In order for consideration to qualify as an ingredient of a valid contract, it must be valuable in the eyes of the law and must flow from the offeree to the offeror. However, consideration need not be adequate so long as parties have agreed that it constitutes sufficient price or motive for the formation of a contract.

Parties to a contract cannot be said to have a legally binding agreement between them where either or both parties lack the capacity to contract. Capacity in this regard refers to the competence of a party in the eye of the law to be able to enter into a contract. In this regard, some classes of persons are incompetent in law or have a limited capacity to enter into contractual relations. They include minors, lunatics, illiterates or intoxicated persons.

Before a valid contract can be said to have been created, there must be an intention by the parties to the contract to create legal relations. This means that even where other ingredients are present, parties may not have intended to create a legally enforceable agreement and this can be inferred from the nature of the contract.

Generally, a contract could be oral or written. It could also be express – clearly stated or implied – deduced from conduct of the parties. Oral contracts are very common in everyday activities. Indeed, it would be almost impossible to require that all contracts, no matter their level of significance should be written.

It is a fundamental principle of the law of evidence that he who asserts must prove. Therefore, the person who alleges that there was a contract has the burden of proving the
assertion to the satisfaction of the determining body.

How do you do this? First you need to give oral evidence of what transpired and what the understanding between the parties to the agreement was. In doing this, there will be need to state the terms and conditions that formed the contract and also highlight the understanding between the parties.

A party who seeks to prove the existence of an oral contract should go a step further and call a witness or witnesses to buttress his claim. In addition, where there are supporting documents such as emails, memos, receipts, faxes, photographs, recordings etc; Cheques or payment vouchers and bank statements could also be used as evidence of the existence of a contract. Documentary evidence generally is more reliable and
usually serves as an aid in assessing the veracity of oral testimony or evidence.

Whilst for many years the misreported quote of Samuel Goldwyn or Metro, Goldwyn, Meyer fame, of “an oral contract is not worth the paper it’s written on” has formed the basis of the view that oral contracts are unenforceable, this myth is dangerous.

Goldwyn’s actual quote, was praising a colleague and was in fact “His verbal contract is worth more than the paper it’s written on” it was meant to praise the honour and integrity of his colleague. In modern business where emails, telephone calls and conversation rule, and time is often of the essence both to secure the work and confirm the contract great care should be taken that an enforceable contract is not created by accident.

Acknowledgements: Teingo Inko-Tariah / Thomson reuters online legal resource Practical Law Company / Olender Feldman LLP

NOT LEGAL ADVICE: Information provided in this Blog, is for information purposes only. It is not and should not be taken as legal advice. You should not relay on or take or fail to take any action based upon this information. Never disregard taking legal advice or delay in seeking legal advice because of something you have read in this blog, or on this website. Ian Randall is an Attorney & Counsellor at Law (NY), with 25 years of Corporate and Commercial experience in several jurisdictions. To see how Owllegal could help you, please visit; www.owllegal.org or email Ian Directly, his email address is ian@owllegal.org

Extensions of Time

Payment for construction works is usually paid in instalments, however on very small projects alternative payment methods such as payment upfront or payment on completion may be utilised. Payment in construction is statutory protected under Part two of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA). All construction contracts entered into before October 2011 must comply with the act and after October 2011, they must also comply in line with the amendments made in Part 8 of the Local Democracy, Economic Development and Construction Act 2009 (LDEDCA).

This act provides details of payment provisions and should a contract not include or is missing information on necessary payment provisions then the rules of The Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) 2011 (The Scheme) will apply. If a project is due to take longer than 45 days then under Section 109 (1) of the (HGCRA), the contractor is entitled to instalments, stage payments or other periodic payments.

Section 110 (1) of the HGCRA provides information on the dates for payment and states that the contract should provide ‘an adequate mechanism for determining what payments become due under the contract’ (1996).

For a contract to be valid under the HGCRA the following items must be addressed and included: what amount is due and when, the final date for payment (interim and final), the payment notice outlining the amount due and how it is determined, the default notice and the pay less notice. They must also adhere to a strict time frame, which if not outlined in the contract, will follow the timings in the Scheme. The time frames will vary depending on the specified contract and can be amended for individual projects. The statutory dates between the due date and final date for payment in ‘The Scheme’ is 17 days.

Under the HGCRA, a payment notice must be provided for each payment in the contract that contains the notified sum which can be issued by a ‘specified person’ for example the Client, Architect or Contract Administrator and must be issued within 5 days of the due date. A pay less notice can be issued if the payer feels less than the notified sum should be paid or if the contractor requires less than that
outlined on their interim application for payment. However, the timing is critical, and it will not be valid if not served on time. The amended HGCRA states that the pay less notice must include the calculations to show the reductions and reasoning.

The contractor also has the right to suspend works under the Section 112 of the HGCRA if they are ‘not paid in full by the final date for payment and no effective notice to withhold payment has been given’. It should also be noted that ‘pay when paid’ clauses were removed from contracts as per Section 113 of the HGCRA and Paragraph 11 of the Scheme (2011).

It is important that all parties to a contract are aware of the provisions and the specified dates. If the contract does not state specific dates this will not exempt a party to paying as the dates strictly outlined in the Scheme in line with the relevant acts will be enforced.

Acknowledgement is given to Bradley Mason of Bradley Mason LLP

NOT LEGAL ADVICE: Information provided in this Blog, is for information purposes only. It is not and should not be taken as legal advice. You should not relay on or take or fail to take any action based upon this information. Never disregard taking legal advice or delay in seeking legal advice because of
something you have read in this blog, or on this website. Ian Randall is an Attorney & Counsellor at Law (NY), with 25 years of Corporate and Commercial experience in several jurisdictions. To see how Owllegal could help you, please visit; www.owllegal.org or email Ian Directly, his email address is ian@owllegal.org.

Buying a Company

There are two principal methods of acquiring the business of UK company:

  • Buying the shares in the target company
  • Buying the target company’s business and assets

A company may seek to develop its business in many ways, including expansion by acquisition. Once a specific target has been identified, the buyer can begin to assess its value. There are various valuation methods that could be adopted, but the four most commonly used are:

  • Discounted cash flows
  • Market multiples
  • Net asset valuations
  • Dividend yields

Different methods and multiples may be used according to the target company’s industry sector. Often the price for the shares will be calculated on a “cash free, debt free basis”. Traditionally, completion accounts have been used to establish the value of the shares as at completion retrospectively, with the consideration being adjusted as necessary after the accounts have been agreed

There are two main methods of acquiring a target business that is carried on by a company:

  • Share purchase: This involves the buyer acquiring all the shares in the company that owns the target business or assets
  • Business or asset purchase: The alternative approach is simply to buy each of the individual assets that make up the target business

The two acquisition structures are fundamentally different. If the shares in a company are purchased, all its assets, liabilities and obligations are acquired (even those the buyer does not know about). If assets are purchased, only the identified assets and liabilities that the buyer agrees to purchase are acquired.

On a share purchase, there may be certain change of control provisions that will need to be addressed, but otherwise there will be no need for such third-party consents. On an asset purchase, where there is a change of ownership of the assets themselves, the consent of customers, suppliers, landlords and others may be required to the assignment or novation of existing contracts.

A seller will often prefer to transfer the company, where the seller’s ongoing liability is generally limited to the extent of warranties and indemnities it gives to the buyer. By contrast, the buyer may have reasons for preferring an asset purchase. It may be concerned about particular liabilities in the target company and may prefer to “cherry pick” assets and only assume known and quantified liabilities.

Due diligence is the information-gathering process carried out by the buyer to find out as much as possible about the target company early on in the negotiations. Through this process, the buyer aims to gain a complete picture of the target and its critical success factors, strengths and weaknesses.

The due diligence exercise generally comprises an assessment of the financial, legal and commercial status of the target. The usual pattern of events is for the buyer’s lawyers to submit a lengthy questionnaire to the seller requesting information on a wide range of matters such as the target’s tax position, its main commercial contracts and the status of the intellectual property used in the business.

The share purchase agreement is the principal contractual document relating to a share purchase. It documents the agreement between the parties to sell and purchase the entire issued share capital of the target company at a specified price and sets out the other terms governing the acquisition. Depending on the complexity and size of the particular acquisition, the agreement can often run to more than 100 pages, as much as half of which may comprise the transaction warranties.

As well as containing lengthy warranties and indemnities, the share purchase agreement deals with how the consideration for the transaction is to be satisfied, any conditions precedent that the purchase may be subject to, any restrictive covenants which bind the parties, completion arrangements and other matters such as the transfer of pension rights.

In addition to the share purchase agreement, there are a number of ancillary documents that typically accompany the share purchase agreement, namely the disclosure letter and the tax covenant.

A proposed share purchase may require various consents or approvals, and this could affect the transaction timetable. The main types of approval that may be necessary include:

  • Board approval
  • Shareholder approval
  • Approval of regulatory authorities or other third parties

The nature and extent of the approvals required will obviously have an important bearing on the timing of the transaction, as will the level of due diligence required.

If the transaction involves a corporate buyer and seller, it will usually be necessary for the board of directors of each party (or a duly appointed committee of the board) to consider and approve both the transaction as a whole, and the execution of the key transaction documents. Any meeting of the directors should be minuted. If the buyer and the seller are UK companies, shareholders’ approval for the transaction may be required under:

  • A provision in their articles of association or a relevant shareholders’ agreement
  • In certain circumstances, the provisions of the CA 2006

The buyer will need to give early consideration to the question of whether the share purchase will trigger the need for the involvement of any regulatory authorities. The consent of certain third parties, such as the target company’s lenders or one of its major customers or suppliers may be required where, for example, the key contractual arrangements between the target company and that third party are subject to change of control provisions.

On completion of the transaction, the buyer will become the new owner of the target company and will be keen to get on with integrating the target according to its acquisition strategy.

Acknowledgment: This blog relies heavily upon information provided by Martin Mendelssohn and Simon Howley, CMS Cameron McKenna LLP and Practical Law Limited.

NOT LEGAL ADVICE: Information provided in this Blog, is for information purposes only. It is not and should not be taken as legal advice. You should not relay on or take or fail to take any action based upon this information. Never disregard taking legal advice or delay in seeking legal advice because of something you have read in this blog, or on this website. Ian Randall is an Attorney & Counsellor at Law (NY), with 25 years of Corporate and Commercial experience in several jurisdictions. To see how Owllegal could help you, please visit; www.owllegal.org or email Ian Directly, his email address is ian@owllegal.org.

Extensions of Time

There are three key aspects to a building or engineering contract in connection with the timing of that project:

  • The date for completion
  • The mechanism for changing (extending) the date for completion
  • The consequences for the parties of a failure to meet the date for completion

At the outset, particularly if a project includes works by a number of different contractors, the parties must agree a clear programme or programmes setting out when the different work packages should commence and complete. Without a clear programme, they will not be able to manage the project effectively and prevent delay or allocate the consequences of any delay.

Most building contracts and engineering contain express provision for completion of the works by a certain date. Even in the case of the simplest construction project, it is usually one of the few things that the parties make sure to agree on during their negotiations.

If the contract does not include a contractual date for completion, this does not mean that the contractor can take as much time as it likes. In these circumstances, Section 14 of the Supply of Goods and Services Act 1982 implies a term requiring the contractor to complete its works within a reasonable time:

“Where, under a contract for the supply of a service by a supplier acting in the course of business, the time for the service to be carried out is not fixed by the contract, left to be fixed in a manner agreed by the contract or determined by the course of dealing between the parties, there is an implied term that the supplier will carry out the service within a reasonable time…”

What is “reasonable” is a question of fact in any given case. Delays will often occur on a project that are not the contractor’s fault or responsibility. For example, a delay may arise because the employer is unable to give the contractor possession of the site on time, or because the employer has instructed the contractor to carry out additional works (as a variation to the original scope of works.

If a delay event occurs that is the employer’s fault and the contract does not make provision for that delay, the original completion date falls away and time is put “at large”. This means the contractor is under an obligation to complete the works within a reasonable time.

Time at large results from the application of the “prevention principle”, which provides that no party may require the other to comply with a contractual obligation in circumstances where that party has itself prevented such compliance. If the employer has prevented the contractor from carrying out the works “on time” according to the original contractual completion date (and the contract does not provide for how that delay is dealt with), the employer cannot insist that the contractor meets the original date for completion.

There are two types of delay for which a contractor may be able to claim an extension of time: (a) Delay the employer caused and (b) Other delays that are not the contractor’s responsibility under the contract. The employer may have specific notification requirements, but the employer and/or the contract administrator may suspend or waive compliance with the contract’s notification requirements. They may do this expressly. Alternatively, a court may find that compliance with a contract term has been waived by silence or through the conduct of the parties. However, in practice, the parties rarely waive these notice requirements.

It is vital that the Contractor, knows the conditions precedent to make extension of time claims, under the contract, and that they adhere to these procedures, or they face the potential of losing the right to claim. Early legal advice is essential!

Acknowledgement: Thomson Reuters online resource Practical Law

NOT LEGAL ADVICE: Information provided in this Blog, is for information purposes only. It is not and should not be taken as legal advice. You should not relay on or take or fail to take any action based upon this information. Never disregard taking legal advice or delay in seeking legal advice because of something you have read in this blog, or on this website. Ian Randall is an Attorney & Counsellor at Law (NY), with 25 years of Corporate and Commercial experience in several jurisdictions. To see how Owllegal could help you, please visit; www.owllegal.org or email Ian Directly, his email address is ian@owllegal.org.

Contract

A contractual dispute is when a party to a contract has a disagreement concerning the terms or definitions. If handled poorly, contractual disputes can be costly and timeconsuming, end up in court and damage a company’s business relationships and reputation. So, what should do if you’re on the receiving end of a contract dispute involving your business?

For a contract to be enforceable there must be a “meeting of the minds” across all the required elements, offer; acceptance; capacity; consideration and intention to create legal relations; between all the parties involved. So, all parties must have a solid understanding of every term in the contract and mutually agree on them. Without this mutual agreement, the contract is not legally valid and can be contested in court.

There are therefore different steps that need to be fulfilled during the formation of a contract. This includes an offer being made, an acceptance of that offer, and a form of payment for the goods or services concerning that offer. It is during these stages that contractual disputes can often develop.

In business, a contractual dispute could involve anyone from your employees to your business partners, your clients to your suppliers.

Examples of disputes include:

  • Issues when a party reviews your contract
  • Issues concerning an offer you’ve made in a contract
  • Disagreements regarding the meaning of a contract’s technical terms
  • Mistakes and errors concerning the terms you’ve addressed in a contract
  • Fraud, such as party claiming they’ve been forced into signing your contract
  • Conflict involving your employees or business partners
  • Disputes where those involved in a contract do not stand by their original agreements made months or years earlier

Disputes can also involve the performance of a party’s duties, or where they have failed to perform their duties, which have been addressed in a previously formed contract. This is known as breach of contract. An example could be a seller failing to deliver goods to a buyer.

In the event of a contractual dispute arising that affects your business, the important thing is to aim to resolve the situation as best you can. It’s wise to also get the best legal support to help you find the right resolution for your business. You should aim to:

  • Find a resolution that isn’t timeconsuming and doesn’t affect the running of your company
  • Find a resolution that isn’t costly and doesn’t impact heavily on your company finances
  • Find a resolution that doesn’t result in the dispute going to court to avoid additional costs and time
  • Find a resolution that doesn’t involve more people than necessary to help keep the dispute under control
  • Handle the dispute with care, so not to damage previously existing business relationships and your reputation

When handled without the right skill, knowledge and approach, a contractual dispute can end badly for your business, causing harm to your relationships, reputation, company operation and finances. So, it’s important to have professional support with the right expertise to help things run smoothly, while saving you time, money and stress.

NOT LEGAL ADVICE: Information provided in this Blog, is for information purposes only. It is not and should not be taken as legal advice. You should not relay on or take or fail to take any action based upon this information. Never disregard taking legal advice or delay in seeking legal advice because of something you have read in this blog, or on this website. Ian Randall is an Attorney & Counsellor at Law (NY), with 25 years of Corporate and Commercial experience in several jurisdictions. To see how Owllegal could help you, please visit; www.owllegal.org or email Ian Directly, his email address is ian@owllegal.org.

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Ian Randall

Results driven Corporate and Commercial Lawyer with 25+ years of experience ensuring the legality of Corporate and Commercial transactions. Adept at drafting corporate and commercial documents, reviewing, disputing, and advising on Commercial and Corporate matters. Clear ADR: Accredited Civil and Commercial Mediator and Alternative Dispute Resolution Specialist.

Honours Degree in Law and a master’s degree in Employment Law and Practice from the University of Central Lancashire.

A member of the New York State Bar in Good Standing.

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