The source of the document is from CIPS, useful to reference when you need a refresh of key contract clauses.
These clauses are of use as standard or what is known as “boilerplate” clauses in many
forms of commercial contract such as distribution agreements and contracts for the supply
of goods and/or services. They are not the substantive clauses in a contract such as A sells
good to B or the warranties and obligations of the parties. They are the additional provisions
which usually appear at the end of an agreement. Users also need all the material principal
provisions of an agreement too. Care should be taken in preparing a contract containing all
or any of these clauses that they are compatible with the remainder of the contract and legal
advice should be taken specific to individual circumstances. They are applicable to the law of
England and Wales. For Scotland or other jurisdictions, local law advice is needed. The
clauses aim to be balanced between supplier and purchaser. If instead a party wants a set of
clauses more to the disadvantage of the other party these should be modified so there is a
negotiating position to move to rather than acceptance of the terms as they are
1. become insolvent or bankrupt or
2. have a receiving order or administration order
made against it or compound with its
creditors, or
3. being a corporation commences to be wound
up (not being a member’s voluntary winding
up for the purposes of reconstruction or
amalgamation), or
4. carries on its business under an administrator
or administrative receiver for the benefit of
its creditors or any of them,
then the other party shall have the right forthwith
by notice in writing to that party or to the
administrator, administrative receiver or to the
liquidator or to any person in whom the Contract
shall have become vested to terminate the Contract.
Alternatively, the party giving notice may at his sole option give such administrator,administrative receiver, liquidator or other person the option of carrying out the Contract subject to its providing a guarantee for the due and faithful performance of the Contract in such form and upto such amount as the party giving notice shall
decide.In the event of the Contract being terminated under this Clause the party giving notice shall have the right by prior notice to the other to enter that other’s premises for the sole purpose of removing any item, equipment or materials which are its property and which are clearly marked and
identified as such. The exercise of either party of their rights under this Clause shall not prejudice any of their rights or obligations accrued prior to termination and the provisions referred to in the Clause relating to Termination for Breach as continuing obligations shall apply.
Comments
The parties are not named as supplier and purchaser
because it is not known which definitions are used in the
remainder of the Contract but could easily be adapted.
The clause provides for:
i. The form and the amount of the security the
administrator etc. is allowed to carry on the Contract as
being at the discretion of the party giving notice and not
to be left to agreement since this could be awkward. As it
is the purchaser who it is to be hoped would be
giving notice, this should be to the Purchaser’s
advantage.
ii. The right of removing any item, equipment or
materials is limited to that which is the property and
marked as such and not just that
which is marked as being the property of the other. One
can always mark something as being your property even
if it is not! Again,
this should be to the Purchaser’s advantage. The Clause
is suitable only for English law. If the Contract is to be
under any law other than English, even if Scottish, then
the Clause would need amendment and legal advice
should be taken accordingly.
The Enterprise Act 2002 made administrative
receivership less attractive than “administration” but the
procedure does still exist so remains in and is mentioned
in the clause. If software is involved then it is wise to
have a separate source code escrow agreement with a
third party agent such as the NCC because the liquidator
is permitted under English law set aside onerous clauses
in contracts and indeed often will simply ignore and be
legally entitled to do so, clauses in contracts which
specify certain events will happen on termination.
Force Majeure
1. For the purpose of the Contract the term
Force Majeure shall mean:
a. war and other hostilities (whether war be
declared or not) invasion, terrorist activity, act of foreign
enemies, mobilisation, requisition or embargo
b. rebellion, revolution, insurrection, military or
usurped power or civil war
c. riot, commotion or disorder except where
solely restricted to employees of the
(Supplier) or its sub-Contractors or subsuppliers
d. earthquake, flood, fire or other natural
physical disasters except to the extent that
any such disaster is caused by, or its effects
contributed to by, the party claiming force
majeure
e. a general industrial dispute not limited to the
employees of the (Supplier) or the employees
of any of its sub-Contractors or subsuppliers.
2. If either party considers that any
circumstance of Force Majeure has occurred
which may affect materially the performance
of its obligations then he shall forthwith
notify the other in writing to that effect
giving full details of the circumstances giving
rise to the Force Majeure event.
3. Neither party shall be considered to be in
default of its obligations under the Contract
to the extent that it can establish that the
performance of such obligations is prevented
by any circumstance of Force Majeure which
arises after the date of the Contract and which
was not foreseeable at the date of the
Contract.
4. If the performance of the obligations of either
party under the Contract is so prevented by
circumstances of Force Majeure and shall
continue to be so prevented for a period less
than 30 days then during that period the
Contract shall be considered as suspended.
Upon the ending of the Force Majeure event
the Contractual obligations of the parties
shall be reinstated with such reasonable
modifications to take account of the
consequences of the Force Majeure event as
may be agreed between the parties.
5. If performance of the obligations of either
party under the Contract is so prevented by
circumstances of Force Majeure and shall
continue to be so prevented for a period in
excess of 30 days then the Contract shall be
terminated by mutual consent and, subject to
Clause 6 below neither party shall be liable to
the other as a result of such termination.
6. If the Contract is so terminated then subject
to the transfer to the (Purchaser) of the
benefit referred to in sub-Clause 7 below the
Purchaser shall pay to the (Supplier) such
reasonable sum as may be agreed between
the parties or in default of agreement as may
be determined by Expert Determination in
accordance with Clause… in respect of costs
incurred and commitments already entered
into by the Contractor/Supplier at the date of
the Force Majeure notice, less the amount of
any payments already made to the (Supplier)
at the date of the Force Majeure notice. If the
amount of such advance payments made to
the (Supplier) exceeds the sum due to the
(Supplier) under this sub-Clause then the
(Supplier) shall repay the balance to the
(Purchaser).
7. The (Supplier) shall transfer to the Purchaser
the benefit of all work done by him or his
sub-Contractors and sub-suppliers in the
performance of the Contract up to the date of
the Force Majeure notice, and if applicable it
shall include the rights in any licensed and
developed software and licensed firmware so
far as the rights in the same have accrued to
the Purchaser prior to the Force Majeure
notice or will do so on the payment under sub-Clause 6 above.
Comment
It is wise to define Force
Majeure, to state what is to happen if an
event of Force Majeure occurs and how the
rights and obligations of the parties are to be
affected. Force Majeure can affect buyer or
seller. Some buyers will not want a force
Majeure clause as it benefits usually the
supplier so consider whether it is needed.
Conversely many suppliers will want all
circumstances beyond their control included
which this clause does not include as a general
provision.
Force Majeure is defined restrictively and it is
for the supplier to establish that the event
prevents him from performing the Contract. If
necessary other events could be included but it
is strongly suggested that “beyond the
Supplier’s control” should never be used it is
too broad a term where a buyer is concerned.
Suppliers of course will want that provision
included.
There is provided an initial period of
suspension; the period could be lengthened if
considered appropriate. If the force Majeure
event is then past the parties rights are
adjusted. It should not be left to agreement of
the parties without a third party reference as
otherwise the obligation is unenforceable.
If the event continues then the Contract is
terminated by mutual consent; the supplier is
then paid for the work he has done provided
that the purchaser is given the benefit of this.
Confidentiality, Intellectual Property and Data Protection
1. Each party shall treat the Contract and any
information it may have obtained or received
in relation thereto or arising out of or in
connection with the performance of the
Contract or its negotiation or relating to the
business or affairs of the other as private and
confidential and neither party shall publish or
disclose the same or any particulars thereof
without the prior written consent of the other
or as may be permitted under the later
provision of this Clause.
2. The obligations expressed in sub-Clause 1
above shall not apply to any information which:
2.1 is or subsequently comes into the public
domain otherwise than by breach of this
Clause
2.2 is already in the possession of the receiving
party without an accompanying obligation of
confidentiality
2.3 is obtained from a third party who is free to
divulge the same
2.4 is independently and lawfully developed by
the recipient or its sub-Contractor outside the
scope of the Contract.
3. So far as it may be necessary for the
performance of the Contract or for the
operation and maintenance of the subject
matter of the Contract each party may
divulge any information to be kept
confidential under sub-Clause 1 of this
Clause to their employees, agents and subContractors
on a “need to know” basis but
undertake that they will take all steps
necessary to ensure compliance by such
employees, agents, and sub-Contractors with
the obligations as to confidentiality expressed
in this Clause, including without limitation incorporating
such clauses into their own contracts with such persons,
Comments
This is an important Clause If
confidential information is to be
disclosed during the course of
negotiations then a separate
agreement covering this should be
made and signed prior to the
information being released known
as a confidentiality or Non
Disclosure Agreement (NDA).
Some companies will not want
subcontractors or agents to have
access to confidential information at
all so changes would need be made
to that effect.
Where one party is in the public
sector it sensible to say by a
provision in the Agreement that
before disclosing information in
response to a Freedom of
Information Act 2000 request the
other party will first notify the
other. Also it may be necessary to
specify exactly which parts of the
Contract are confidential when
dealing with some public bodies
subject to FOIA.
3. So far as it may be necessary for the
performance of the Contract or for the
operation and maintenance of the subject
matter of the Contract each party may
divulge any information to be kept
confidential under sub-Clause 1 of this
Clause to their employees, agents and subContractors
on a “need to know” basis but
undertake that they will take all steps
necessary to ensure compliance by such
employees, agents, and sub-Contractors with
the obligations as to confidentiality expressed
in this Clause, including without limitation incorporating
such clauses into their own contracts with such persons, and will be responsible to the other party for any failure
by any employee, agent or sub-Contractor to comply with such
obligations whether such employee, agent or
sub-Contractor was aware of them or not.
4. All intellectual property rights in all works or supplies
provided under this Contract which are written or produced
on a bespoke or customised basis, including, without limitation,
all future such rights when the said works are created, shall
be owned by the Purchaser and the Supplier shall ensure that
it executes all documents necessary to effect such ownership.
Where the Supplier provides existing intellectual property right
protected material to the Purchaser under this Agreement it shall
disclose this to Purchaser, warrants it has the right to do so and shall
fully indemnify and hold Purchaser harmless against all loss or
liability arising from any third party intellectual property rights
claims arising both from such existing material and in relation to
any such bespoke work. Except as provided above both parties retain
ownership of their pre-existing intellectual property rights protected material.
Comment
Often a Supplier will want
to own copyright, patents,
design rights and trade
marks in works even those
customised or produced
solely for a Purchaser.
However as a buyer it is
better that the default
position in the core
clauses is that the rights
are owned by the buyer. If
nothing is said then for
copyright works under the
Copyright, Designs and
Patents Act 1988 such as
designs for websites or
computer software, the
rights remain with the
original author/supplier
and all the buyer receives
is the licence or right to
use, leaving the supplier
free to use the rights for
other clients. Some
suppliers however wish to
retain IPR in customised
work and many buyers are
content for that to be the
case as long as they have
the rights to which they
require.
4. All intellectual property rights in all works or supplies
provided under this Contract which are written or produced
on a bespoke or customised basis, including, without limitation,
all future such rights when the said works are created, shall
be owned by the Purchaser and the Supplier shall ensure that
it executes all documents necessary to effect such ownership.
Where the Supplier provides existing intellectual property right
protected material to the Purchaser under this Agreement it shall
disclose this to Purchaser, warrants it has the right to do so and shall
fully indemnify and hold Purchaser harmless against all loss or
liability arising from any third party intellectual property rights
claims arising both from such existing material and in relation to
any such bespoke work. Except as provided above both parties retain
ownership of their pre-existing intellectual property rights protected material.
Comment
Often a Supplier will want
to own copyright, patents,
design rights and trade
marks in works even those
customised or produced
solely for a Purchaser.
However as a buyer it is
better that the default
position in the core
clauses is that the rights
are owned by the buyer. If
nothing is said then for
copyright works under the
Copyright, Designs and
Patents Act 1988 such as
designs for websites or
computer software, the
rights remain with the
original author/supplier
and all the buyer receives
is the licence or right to
use, leaving the supplier
free to use the rights for
other clients. Some
suppliers however wish to
retain IPR in customised
work and many buyers are
content for that to be the
case as long as they have
the rights to which they
require.
5. Both parties shall ensure that they, their
employees, agents and sub-Contractors shall
observe the requirements of the Data
Protection Act 1998 and any amendments or
revisions thereto in the provision and use of
the subject matter of the Contract and personal
data processed under it and shall
comply with any request made or direction
given to the other which is directly due to the
requirements of such Act.
6. On the conclusion or termination of the
Contract both parties shall cease to use all copies
of confidential information obtained from the
other except in so far as the law requires the
information be retained in which event it shall be
kept until such period is over and in any event kept
strictly confidential under the provisions of this clause..
7. The obligations relating to confidentiality shall
continue notwithstanding termination of this
Agreement until such time as the information is no
longer confidential in nature.
Publicity
Neither party shall without the written consent of
the other (the giving of which consent shall be at
the sole discretion of that party) advertise,
publicly announce or provide to any other person
information relating to the existence or details of
the Contract or use the other party’s name in any
format for any promotion, publicity, marketing or
advertising purpose.
Waiver
Any failure by the (Purchaser) to insist at any
time upon the performance of any of the terms,
provisions or undertakings of the (Supplier)
contained in the Contract or to exercise any rights
thereunder shall not constitute or be construed as
a waiver thereof or a relinquishment of the
(Purchaser’s ) rights to require the future
performance of any such term, provision or
undertaking but the obligation of the (Supplier)
with regard to the same shall continue in full
force and effect.
Comment
Some clauses limit the period of confidentiality
but in general wording such as this where the
agreement might relate to confidential
information potentially secret for years or
decades the provision that it be kept secret for
so long as it maintains its confidential nature is
the best protection for all parties.
On termination some information may need to
be retained rather than destroyed, hence the
wording above. It may for example be
incorporated within briefing papers for
company boards which must be retained as
matter of record. For PPP (private and public
partnership) contracts one party often insists
that data records are maintained for their
access for many years and even longer where
documents are signed as deeds. Documents
signed as a deed have a legal statutory
limitation period of 12 years, rather than the 6
year period for other contracts so obviously
such documents must be kept for at least a 12
year period
Termination for Breach
1. Either party may terminate this Contract
forthwith by written notice to the other
effective from the date of service of such
notice if:
a. there is a breach by the other party of any
provision of the Contract which expressly
entitles the party not in breach to terminate
the Contract.
b. there is a material or persistent breach by the
other party of any other term of the Contract,
which is not remediable, or if it is remediable
has not been remedied within 30 days of the
service of written notice to the defaulting
party specifying the breach and requiring it to
be remedied.
2. On termination other than for the default of
the (Supplier) the Purchaser shall pay to the
(Supplier) the proportion of the Contract
Price payable in respect of the materials
supplied and/or services performed by the
Supplier up to the date of termination
together with the costs of the commitments
already entered into by the (Supplier) at the
date of termination of the Contract less the
amount of any payments already made to the
(Supplier ) up to the date of termination. If
the amount of payments already made to the
(Supplier) at the date of termination exceeds
the sum due to the (Supplier) under this subClause
then the (Supplier) shall repay the
balance due to the (Purchaser). Any such
payment shall be in full satisfaction of the
Supplier’s rights to payment, compensation
or damages in respect of the termination or
the breach of Contract giving rise to the right
of termination.
3. On payment of the sum due under sub-Clause
2 above the (Supplier) shall transfer to the
(Purchaser) the benefit of all work done and
the property in all materials supplied by the
(Supplier) or his sub-Contractors or subsuppliers
in the performance of the Contract
up to the date of termination which benefit
shall include any rights in any licensed or developed software and licensed firmware so
far as the rights in the same have already
accrued to the Purchaser under the Contract
or will do so on the payment under subClause
2 above. Where the Contract specifies
that intellectual property rights in commissioned
works will vest in the Purchaser on payment no
such rights shall vest unless and until full payment has been made.
4. If the Contract is terminated by reason of the
default of the (Supplier) the (Purchaser) shall
be entitled to the like benefits and ownership
of materials as are stated in sub-Clause 3
above without prejudice to any specific provision
relating to ownership of intellectual property rights.
The Purchaser shall only pay to the
(Supplier) the proportion of the Contract
Price payable in respect of the work done and
/or services performed by the (Supplier) up to
the date of termination after deduction of
payments already made to the (Supplier), the
costs reasonably incurred by the(Purchaser)
in obtaining the completion of the work to be
performed under the Contract by others and
any damages which may be payable by the
(Supplier) in respect of the termination or the
breach of the Contract giving rise to the right
to termination. If the amount due to the
(Supplier) is less than the amount which the
(Purchaser) is entitled to deduct then the
(Supplier) shall pay the balance to the
(Purchaser).
5. Following the termination of the Contract
neither party shall have any further rights or
obligations in relation to the other party other
than those stated in this Clause and in the
Clauses listed in sub-Clause 6 below which
shall continue in full effect. Subject to subClause
2 above termination shall not however
affect the rights of action and remedy of the
parties which shall have accrued at the date
of termination or shall thereafter accrue.
6. Clauses which continue:
Confidentiality
Publicity
Waiver
Infringement Indemnity
Governing Law and Jurisdiction
Intellectual property rights
Comments
This Clause sets out the rights
and obligations of the parties if
termination is due to the default
of the Purchaser or to the default
of the Supplier.
For an IT Contract it might need
to be supplemented by reference
to source codes etc. The list of
continuing obligations is only a
guide; there may be others
depending upon the terms of
the particular Contract. There is
no Infringement
Indemnity as a Core Clause but it
is assumed that for an IT
Contract or intellectual property
licence agreement one will be
included.
Terms of Payment
1. The (Supplier) shall be entitled to invoice the
(Purchaser) at the times and in the manner
specified in the Contract.
2. Provided that the invoice was one which
under the Contract the (Supplier) was entitled
to submit the (Purchaser) shall pay (the
Supplier) within the period of days specified
in the Contract from the date of receipt of the
invoice subject to any right of deduction
which the Purchaser may have by way of setoff
or abatement. If the (Purchaser) does
make any such deduction then he shall notify
the (Supplier) accordingly in writing with
reasons.
3. If the (Purchaser) shall fail to make any
payment to the (Supplier) to which the
(Supplier) is entitled under this Clause after
deduction of any amount which the Purchaser
is entitled to deduct, then the (Purchaser)
shall pay to the (Supplier), where so demanded
by the Supplier, in addition to the
amount not properly paid simple interest for
the period in days until such payment is
made. The rate of interest shall be… … per
annum over the Base Rate of the Bank of
England ruling at the date when the payment
became overdue.
Comments
The details of the percentages to be
paid and the events against which
payment is to be made must
be specified elsewhere in the Contract
since they will clearly vary.
This Clause allows the Purchaser to
deduct amounts for defects, work not
properly performed etc, otherwise
payment is to be made within 30
days.
No specific rate of interest has been
specified. It is possible that the
purchaser could, even if the
Contract is subject to the Late
Payment of Commercial Debts
(Interest) Act 1998, replace the
statutory rate currently of 12.25% with
a lower figure provided
that the Contract gives the supplier a
substantial remedy or deters late
payment, and is fair and
reasonable.
The previous CIPS clause relating to
“undue delay” in payment has been
omitted. If it is considered appropriate
to give the unpaid seller an additional
remedy then there should be a definite
period
stated after which the seller could
exercise the right to suspend – say
another 30 days. In any event breach
by the Purchaser of the payment
would probably be considered a
material breach, giving the right to
terminate if payment was not
made within another 30 days. Note it
is a “material breach” which is
referred to in the termination Clause
and not a “breach of a
material term” which could be
construed as a condition of the
Contract and time of payment is
not a condition unless expressly made
so.
12
Time of the Essence
The time for delivery and/or completion of
the work to be performed under the Contract
shall be of the essence of the Contract.
Comments
The purpose of a “time of the essence”
Clause is to give the innocent party the right to reject the goods and
terminate the Contract for a breach of a condition if there is not strict
compliance with the time stipulated for the performance of the
obligation.
Thus a delay of only one day would be sufficient in practice if there is
a delay the clause will not always be invoked and the parties will
escalate the matter and discuss a resolution to the delay rather than
the draconian step of termination, although in some situations delay
means the buyer has no use of the goods and the termination for
breach of contract option is necessary. Good management of the
contract and relationship between the contracting parties can help
ensure disputes over timing are resolved.
It is an extremely critical clause where time is important. Although the
right to reject and terminate may be useful if goods are wanted for a
seasonal trade or for showing at a particular exhibition, the more
common reason for the buyer rejecting is that he
no longer wants the goods because the market for their re-sale has
fallen and he would make a loss if he accepted them or late delivery
might put him in breach of his contract with his own customer
This does not apply to a normal commercial
Contract for the supply of hardware and software or other similar
Contracts where the
equipment/software is for the Purchaser’s own use. The Purchaser’s
remedy will normally be to recover damages for delay. Often the
Clause will not therefore be required. If, exceptionally, there is some
particular reason for requiring delivery or completion by a specific
date, and if late there would be no value to the Purchaser in taking
delivery/accepting completion, then the Clause could usefully be
included.
Often the contract will also provide for liquidated damages for delay
instead or allow liquidated damages plus a right to terminate when a
certain period has passed.
Liquidated damages are a fixed sum per period of delay or a
percentage of the price fro each week of delay or whatever is agreed
and can be simpler to enforce than bringing a court action for
damages for breach of contract. They must under common law be a
genuine pre-estimate of the loss suffered by such a delay. Thus the
parties must calculate carefully the sum included. If that is not the
case then the clause risks being held to be void as it is then what the
courts call a ‘penalty clause. For that reason never head such a clause
“penalty clause” but instead use the phrase “liquidated
damages”. They are also sometimes known as LDs.
13
Notices
1. Any notice or other communication which
either party is required by the Contract to
serve on the other party shall be sufficiently
served if sent to the other party at its address
as specified in the Contract either (a) by
hand; (b) by registered or first class post or
special or recorded delivery or (c) by facsimile or
electronic mail transmission confirmed by
registered, first class post or recorded
delivery within 24 hours of transmission.
2. Notices are deemed to have been served as
follows: delivered by hand; on the day when
they are actually received, sent by post,
special or recorded delivery; two
working days after posting, sent by facsimile
or electronic mail; on the day of transmission
if transmitted before 16.00 hours on the
working day, but otherwise 09.00 hours on
the following working day, provided in each
case that the required confirmation is sent.
Comments
It is wise to have a
notices clause of this
kind.
14
Entire Agreement
This Contact constitutes the entire agreement
between the parties concerning its subject matter,
and supersedes any previous accord, understanding
or agreement, express or implied. Each party
confirms that it has not relied upon any representation
not recorded in this Contract inducing
it to enter into this Contract.
No variation of this Contract shall be valid unless
it is in writing, refers specifically to this Contract
and is duly executed by the authorised representatives
of both parties on or after the date of this Agreement.
15
Clause 11
Dispute Resolution
1. If any dispute or difference whatsoever shall
arise between the parties in connection with
or arising out of the Contract the parties
shall first seek to resolve the matter between
themselves within a period of 14 days.
The Managing Director or equivalent
Person of both parties shall be the nominated
officer responsible for seeking resolution
to the dispute.
If agreement is not reached either party
may give the other 7 days notice to resolve
the dispute or difference through Alternative
Dispute Resolution (ADR) in accordance
with the mediation procedure of the Centre
for Effective Dispute Resolution (CEDR).
If the parties fail to agree terms of settlement
of their dispute or difference within 56 days
of the receipt of such notice or the party to
whom the notice was given refuses to
participate in the ADR procedure then the
matter shall be referred to Arbitration in accordance
with sub-Clause 2.
2. Subject to sub-Clause 3 below if any dispute or difference
which may arise between the parties in connection with or
arising out of the Contract is referred to ADR mediation, but
is not so settled as specified in sub-Clause 1, then either party
shall give notice to the other and such dispute or difference shall
be referred to Arbitration. The parties shall agree on the appointment
of a single arbitrator within 14 days after the date of such notice
or in default of agreement the arbitrator shall be nominated on
the application of either party by the President for the time being
of the Chartered Institute of Arbitrators. The Arbitration shall be
conducted in accordance with the then current Arbitration Rules
as published by the Chartered Institute of Arbitrator
3. There are excluded from Arbitration any proceedings brought
by one party against the other which arise out of the failure by
that other party to comply with the provisions of any binding
agreement setting out the terms upon which the dispute or
difference was settled as a result of or following from the ADR
mediation procedure referred to in sub- Clause 1 above
Comments
This Clause provides for a three-stage
process of dispute resolution. First the
parties try to resolve it themselves. The
second stage is ADR mediation under the
auspices of the CEDR. If in a defined
time this is not successful then the dispute
is referred to court. Most big British
companies however have found
arbitration to be more expensive than
litigation, although it does have the
advantage of confidentiality. Both involve
solicitors, barristers and long complex
hearings but in the case of arbitration the
arbitrator too has to be paid and the
rooms hired where it is held, unlike in
court and in addition can be appealed to
court in any event. Thus few big
companies specify arbitration and instead
give the courts jurisdiction. The third
stage is court action.
Immediate reference to either the courts
or arbitration is contrary to modern
purchasing practice so the first step
should be to ADR although if an
emergency court order to restrain
infringement of intellectual property rights
and similar matters is not precluded as the
courts would retain jurisdiction.
As an alternative to going to court formal
arbitration can be used and an alternative
in place of the latter part of this clause.
Arbitration is confidential and preferred in
some industry sectors. Some sectors have
their own arbitration schemes to which
reference should be made. It is important
to distinguish between mediation/ADR
and arbitration. Mediation can be used
before going to court or arbitration and is
usually, but not always, not binding unless
the parties reach agreement to settle. By
contrast an arbitrator or a judge if the case
goes to court decides who wins the
dispute. Where arbitration is chosen
alternative sub-paragraph 3 is included to
deal with the problem that if the Contract
contains an arbitration Clause then all
disputes must go to arbitration which
would prevent one party from using the
summary judgement procedure in the
High Court to enforce a binding
agreement arrived at after mediation
proceedings.
16
Assignment and Sub-Contracting
1. Neither party shall assign the Contract or any
of its rights or obligations there under without
first having received the written approval of
the other party
2. The (Supplier) shall not sub-Contract the
Contract or any part thereof without having
first obtained the written permission of the
(Purchaser) provided that this restriction shall
not apply to sub-Contracts for materials or
minor details or any part of the work to be
performed or materials or equipment to be
supplied for which the sub-Contractor is
named in the Contract.
3. The (Supplier) shall be responsible for the
acts, defaults and omissions of its subContractors,
whether approval has been given
to their appointment under this Clause or not,
as if they were his own and any consent
given under this Clause shall not relieve the
(Supplier) of any of his obligations under the
Contract.
Comments
This Clause is straightforward.
Some Purchasers may be content
that consent must not be
unreasonably withheld
17
Clause 13
Statutory Regulations
1. Both parties shall in all matters relating to the
performance of the Contract comply with all
Acts of Parliament and with all orders,
regulations and bye-laws made with statutory
authority by Government Departments or by
local or other authorities. The cost to each
party of meeting the requirements of this
Clause shall be borne by that party.
2. If the cost to the (Supplier) of the
performance of the Contract shall be
increased or reduced by reason of the making
after the date of the Contract of any new law
or order or regulation having the force of law
as referred to in sub-Clause 1 above or of the
making of any change to any such law, order
or regulation in force at the date of Contract
that shall be applicable to the Contract (other
than any tax on profits), the amount of such
increase or reduction shall be paid to or
repaid by the (Supplier) as appropriate.
Comments
The Clause is straightforward
and although in a sense
unnecessary as each party must
comply with statute in any event
it can be a useful reminder
18
Clause 14
Health & Safety
1. The (Supplier) undertakes that he and his
employees, agents and sub-Contractors will
at all times comply with all health and safety
requirements relating to the carrying out of
the work under the Contract. Such
requirements include in addition to statutory
laws and regulations any codes of practice
and British Standards or their equivalent
relating to Health or Safety which may be
applicable to the performance of the
Contract.
2. When the (Supplier) his employees, agents or
sub-Contractors are required to carry out
work on the (Purchaser’s ) premises then the
(Supplier) undertakes that in carrying out the
work they shall additionally comply with all
the (Purchaser’s ) rules and practices relating
to safety and the conduct of persons working
on the (Purchaser’s ) premises.
Clause 15
Law
The construction, performance and validity of the
Contract shall in all respects be governed
by the laws of England and Wales.
Comments
This Clause is a useful addition. It may be
appropriate to strengthen the provision on
environmental protection but care needs
to be taken not to try to be too specific
and run the risk of omitting some
important element
19
CLAUSE 16
No Third Party Rights
Subject to clause [●], a person who
is not a party to this Agreement may
not enforce any of its terms under the
Contracts (Rights of Third Parties) Act 1999 (“the Act”).
Where any clause of this Agreement
entitles any person to enforce any term
of this Agreement under the Act, the
parties reserve the right to vary that
term or any other term of this Agreement
without the consent of that person.
Clause 17
Severance
No clause, sub-clause or their relevant parts
in this Contract may be held to be
unenforceable or void except for the judgement
of a court of competent jurisdiction.
Should any clause, sub-clause or part
thereof be so held to be unenforceable
or void the remaining clauses, sub-clauses
and their relevant parts shall remain in full force
and effect to the extent that they are capable
of remaining operative having taken
account of the said court’s judgement.
Comment
The Contracts (Rights of Third Parties)
Act 1999 enables third parties named
under a contract or beneficiaries under it
to sue for breach of contract (although
not to recover more than the original
contracting parties). This can be
excluded by an express contract term as
here. Most parties wish to exclude the
act. Sometimes those taking a licence of
software or buying a business for
example would like third parties such as
other group companies to have rights to
sue and either specifically set out such
third party rights or ensure the Act is
not excluded at all.
Comment
Unfair Contract Terms Act 1977 and
the Competition Act 1998 and article
81(1) and other statutes have the
effect of rendering void and
unenforceable contract clauses in
particular cases.
Often it is helpful to include a
provision saying the rest of the
Agreement will then stand. However,
sometimes in a document with
exclusivity restrictions or noncompetition
obligations for example
the parties would prefer termination
in such case so always consider
whether a different result in such a
case should be expressed
20
Clause 18
Agency
Except as expressly permitted by this
Contract, neither party shall in any
circumstances hold itself out as being:-
(a) the servant or agent of the other party; or
(b) authorised to enter into any contract on
behalf of the other party or in any way to bind the
other party to the performance, variation, release
or discharge of any obligations.
Clause 19
Environment
Supplier warrants that prices for alternative
products, where such products exist, which
are free from harmful toxins, chemicals or
gases, or which are manufactured from
recycled material, and which are in
any case proven to be less detrimental
to the environment. Supplier agrees
to provide goods/services which accord
with the Purchaser’s policy on the environment.
The Supplier shall, when working at the
Purchaser’s premises, perform the
Contract in accordance with the
Purchaser’s environmental policy,
which is to conserve energy, water, wood,
paper and other resources, reduce waste
and phase out the use of ozone depleting
substances and minimise the release of
greenhouse gases, volatile organic compounds
and other substances damaging to
health and the environment.
Comment
This clause is appropriate to
ensure no party is held the agent
of the other. However if the
agreement is indeed an agency
agreement or employment
contract or one party can bind the
other the clause is clearly
completely in appropriate and
should not be used.
Comment
Whilst not legally necessary buyers
with a concern for the environment
or where required by other
contracts to which they are party
which affect the agreement or
which require them as supplier or
purchaser to impose on other
parties in the contract chain may
wish to impose environmental
clauses such as those appearing
above.
21
Clause 20
Conflicts of Interest, fraud and Competition Law
(i) The Supplier shall take all appropriate
steps to ensure that neither it nor any employee,
servant, agent, supplier or sub-contractor is placed
in a position where there is or may be an actual
conflict, or a potential conflict, between the
pecuniary or personal interests of the Supplier
or such persons and the duties owed to the Purchaser
under the provisions of the Contract.
The Supplier shall disclose to the Purchaser
full particulars of any such conflict of interest which may arise.
(ii) The Supplier shall safeguard the Purchaser’s
funding of the Contract against fraud generally and,
in particular, fraud on the part of the staff, or the
Suppliers’ directors.
The Supplier shall notify the Purchaser immediately
if it has reason to suspect that any fraud has occurred
or is occurring or is likely to occur.
(iii) The Supplier warrants that it has engaged
in no price fixing, bid rigging, illegal price
information exchange agreement or other
arrangement in breach of UK, EU or other
competition laws relevant to the Contract
or arrangements between the parties.
Clause 21
Discrimination
The Supplier shall not unlawfully discriminate
within the meaning and scope of any law or
regulation relating to discrimination
(whether in race, gender, religion,
disability, age, sexual orientation or otherwise)
in employment. The Supplier shall take all
reasonable steps to secure the observance
of this provision by all servants, employees
or agents of the Supplier and all suppliers
and sub-contractors employed in the execution of the Contract.
Comments
Buyers in the public sector are more
likely than others to want these
clauses, although all buyers
particularly for bigger tenders may
benefit from such provisions. At the
least the provisions may seek to
ensure the Supplier enquires of its
staff whether any such
arrangements are in place. Given the
Extradition Act 2002 makes it easier
for UK buyers and suppliers to be
extradited to the US and jailed for
up to 10 years for breach of US law
and the UK Enterprise Act 2002
makes UK price fixing and bid
rigging a criminal offence it is
sensible to take every precaution
against this occurring. Some buyers
purchase software to help them
track patterns of pricing to see if
they are victims of price fixing
arrangements in contracting.
Comment
Whilst such a clause as this on
discrimination is legally unnecessary
many businesses see it as part of their
corporate and social responsibility to
highlight such issues and particularly
public sector bodies where they are
purchasing often have clauses similar to
this.
22
Clause 22
TUPE
Where the Transfer of Undertakings
(Protection of Employment) Regulations 2006
apply in respect of the award of the Contract
the undertaking concerned
(or any relevant part of the undertaking)
shall transfer to the Contractor on the
commencement of the Contract.
For 6 months before the Contract expires
the Supplier shall give to the Purchaser
all employee information necessary for TUPE.
The Supplier shall allow the Purchaser to use
the information for the purposes of TUPE
and of re-tendering. The Supplier will
co-operate with the re-tendering of the
Contract by allowing the body to whom
to communicate with and meet the affected employees
and/or their representatives.
The Supplier agrees to indemnify the Purchaser fully
and to hold it harmless at all times from and against
all actions, proceedings, claims, expenses, awards,
costs and all other liabilities whatsoever in any way
connected with or arising from or relating to the
provision of information above.
The Supplier agrees to indemnify the Purchaser from
and against all actions, proceedings, claims, expenses,
awards, costs and all other liabilities (including legal fees)
in connection with or as a result of any claim or demand
by any employee or other employee or person claiming
to be an employee on any date upon which the Contract
is terminated and/or transferred to any third party
(“Relevant Transfer Date”) arising out of their employment
or its termination whether such claim or claims arise before
or after the Relevant Transfer Date.
Comments
In 2006 new regulations protecting employees
on transfers of businesses/undertakings
(TUPE) came into effect. DTI guidance notes
on the 2006 TUPE regulations are at
http://www.dti.gov.uk/er/individual/tup
eguide2006regs.pdf. The Regulations are The
Transfer of Undertakings (Protection of
Employment) Regulations 2006 (SI 2006/246).
They implement Council Directive
2001/23/EC on the approximation of the law
relating to business transfers. They revoke the
Transfer of Undertakings (Protection of
Employment) Regulations 1981.
Many new contracts have no employee
transfer issues at all and a TUPE clause is not
needed. However some particularly
outsourcing arrangements do and this clause
should provide some protection for the
Purchaser. TUPE issues are complicated and
specific legal advice should be sought and a
tailored clause drawn up at the time. The 2006
regulations extend protection further.