01 Sep 2017

COT's top four commercial issues - August 2017

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Greetings to you all from a sunny Finsbury Circus. We hope you have been enjoying your holidays (or at least not resenting those on holiday, due to the increased workloads).

We have tried to add a bit of summer holiday spirit to a couple of this month's articles, so grab a deck chair and enjoy.

A special thanks goes to one of our vacation scheme students, Isabelle Graves, who kindly helped in this month's addition.

Packaged holidays

Good news for holiday fans out there, as the UK looks set to widen the definition of package holidays, in an update to the 1992 Package Travel Regulations aimed at enhancing consumer protections. The proposed update is set out in the latest consultation on the planned implementation of the 2015 EU Package Travel Directive, which must be transposed by 1 January 2018.

The plans are to expand the scope of the concept of a package "organiser" to include companies that share data with a different provider, allowing the second provider to take payment. For example, if an airline provided a link allowing a flyer to book car hire from another company without having to re-enter their credit card details, then the airline could be considered to have organised a package. Organisers take on liability for all of the services provided under the package and for providing insolvency cover.

The consultation also discusses the new concept of Linked Travel Arrangements ("LTA"s). These are created where a trader has facilitated the combination of travel services from a partner, but not through a formal package (for example an airline providing a link to buy hotel accommodation for the trip that's just been booked, but through a separate transaction). LTA facilitators won't have the same level of obligations as package organisers, but they must at least have insolvency protection in place to protect against insolvency-related non-performance and they must inform travellers that they will not benefit from the protections associated with a package.

So next year's holiday plans look a little more secure for consumers, although travel services companies won't have much of a break.

A man walks into a bar…

Mike Ashley (the founder of Sports Direct), Mr Blue (an investment banker turned consultant for the Sports Direct group) and three corporate brokers walked into a bar… Although this looks like the start of a bad joke, the court recently had to decide whether Mr Ashley's alleged offer, in the incongruous setting of the Horse & Groom pub, to pay Mr Blue £15 million if he doubled the share price of Sports Direct, had led to a legally binding contract.

Whilst there is no requirement, under English law, for a contract to be in writing, the basic requirements of a contract are (by way of reminder from law school days): that (i) an agreement has been reached between the parties (shown by one party making an offer and the other accepting it) which (ii) is intended to be legally binding, (iii) is supported by consideration, and (iv) is sufficiently certain and complete to be enforceable.

Although consideration is often held up as a bedrock of contract formation, Mr Justice Leggatt noted that he was not aware of any case in the twenty-first century which had failed for want of consideration.  In this case, consideration was present (even though Mr Blue was already contracted to provide services to Sports Direct), on the basis that a promise to perform an existing duty can satisfy the requirement for consideration as long as a practical benefit is provided to the other party. The three remaining requirements for a contract to be formed were, however, all up for discussion.

The court considered, amongst other things, the setting in which the "jocular" conversation took place, the purpose of the occasion, the nature and tone of the conversation, the lack of commercial sense to the deal and the vagueness of the offer (which lacked any detail).

The court concluded that no one present in the Horse & Groom (including Mr Blue) believed at the time that the offer to pay Mr Blue £15 million was a serious offer.

  1. Setting. Mr Justice Leggatt determined that although Mr Ashley might have an "unorthodox" business style and it may be possible to show that he combines business matters with the consumption of alcohol, Mr Blue could not evidence that Mr Ashley had previously negotiated or concluded a contract in such a setting.
  2. Occasion. The court placed significance on the fact that the business purpose of the meeting did not involve Mr Blue, but was focussed on attracting the business of the three bankers. Given this fact, a serious offer made by Mr Ashley to Mr Blue would have been "completely extraneous" to the serious purpose of the meeting.
  3. Nature and tone of conversation. Evidence from the three witnesses was that "everyone was laughing throughout" and on this basis, the court determined that no one could reasonably have understood the discussion to relate to serious business.
  4. Lack of commercial sense. There was no commercial reason for Mr Ashley to make such an offer nor was there any evidence that Mr Ashley had ever offered anyone at Sports Direct an incentive payment or bonus close to the alleged offer of £15 million. 
  5. Incongruity with Mr Blue's role. It was unclear to the court how Mr Blue, through his skills and contacts in corporate finance, could double the share price. Mr Justice Leggatt concluded that no reasonable person could have understood the offer to be a serious one, given that it would be "inherently absurd" for such a contract to be formed on the sole provision that Mr Blue perform some work (the terms of which were to be left unspecified) in order to increase the share price.
  6. Vagueness of the offer. There was no discussion as to how the utility or effect of Mr Blue's work was to be measured and the court was not convinced that any timescale had been agreed between the parties within which such increase in share price should take place nor a timescale for which the share price should remain above £8 per share.
  7. Perceptions of the three witnesses. The court placed significance on the testimony of the three corporate brokers who deemed the conversation "banter".
  8. Mr Blue's perception. Mr Justice Leggatt considered that Mr Blue himself did not take the conversation seriously at the time, finding it improbable that a person with Mr Blue's business experience would not have made a written record of the alleged agreement and would have waited a year to discuss the agreement with Mr Ashley. On this basis, it appeared that only when the share price began to rise (over a year after the meeting) did Mr Blue begin to attach significance to the conversation.

Driverless lorry trials accelerated

Towards the end of the month, UK ministers announced that driverless lorries will be trialled on motorways next year. The government-funded 'platooning' trials will be carried out by the Transport Research Laboratory, and will see up to three heavy goods vehicles travelling in convoy using wireless technology, with acceleration, braking and steering controlled by the lead vehicle. Before anyone starts to panic – the lorries will have a driver ready to take control of the wheel during the trials! There are expected to be three phases in the trial (with these 'platooning' trials on major UK roads being the first phase), however each phase will only begin once there is evidence that it can be carried out safely.

The announcement comes off the back of a government-funded feasibility study to investigate whether vehicle automation can deliver improvements in air quality, increase fuel efficiency and reducing road congestion. Similar trials have already taken place in Europe and the United States, with six platoons travelling from Sweden, Denmark and Germany to Rotterdam in last year's EU-backed European Truck Platooning Challenge.

Getting driverless vehicles on the road is starting to look like a reality more and more, but news of this trial once again raises questions of how the various safety and societal concerns that come with the growth of AI and automation will be addressed from a regulatory perspective. There are also questions around how businesses involved in the self-driving industry will share the risk of liability associated with getting these vehicles on the road, and how these risks might be insured against. With the Select Committee on Artificial Intelligence set to report on the economic, ethical and societal implications of advances in AI technology by the end of March 2018, hopefully it will not be too long before we start to get some answers on these as yet unknown quantities.

Review-bnb

The Competition and Markets Authority ("CMA") has previously consulted and advised on the practices of online marketplaces who offer their users the ability to post reviews and ratings about the goods and services they have purchased. While such reviews and ratings can offer benefits to those reading them, e.g. allowing a customer to get an opinion of a product before they decide whether or not to purchase it, the CMA found concerning practices from some review sites and online marketplaces with evidence of fake reviews, sponsored ratings and the refusal to post negative reviews.

Accommodation marketplace Airbnb has been working with the CMA after the latter had become aware of a process anomaly in Airbnb's review practices. Customers, who had decided to leave an accommodation early, were not able to leave a review on the site and could only voice their frustrations with Airbnb's customer services team. This potentially had the effect of an accommodation's reviews not giving an accurate reflection of the state of the accommodation, as the customer who left early could have done so due to poor quality standards.

Following its cooperation with the CMA, Airbnb committed to fix this anomaly by the end of August so that guests will be able to leave feedback with important information, such as the suitability of the host or the accommodation, or the reason they chose not to stay, regardless of whether they cancelled on the day of check-in or during their visit.

Businesses who offer reviews and ratings functionality on their websites would be minded to audit their processes to ensure it meets with the CMA guidance and consumer law requirements.
 
 

Handy hints - Drafting tips - loss of data

A drafting tip for you this month, as we are seeing an increase in the number of times a party seeks to exclude liability for loss of data. In certain circumstances, the party seeking to add such an exclusion may have a legitimate reason to do so. For example where the supplier is not providing hosting or back-up services for a customer's data, it has an argument to suggest that it is the customer's responsibility to back-up its data sufficiently. However, at a time where cybersecurity and cybercrime is at the forefront of people's minds, great care should be taken when accepting such an exclusion.

A particular concern when dealing with these exclusions is that it may cut across the express contractual obligations regarding confidentiality, data protection and security. While in the majority of circumstances a customer should try and resist such an exclusion; however where it can't, at the very least the exclusion should be qualified so as not to apply where the losses arise from a breach of the confidentiality, data protection or security obligations.

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