In this edition, we put the spotlight on our Commercial Team and how they can support our charity clients with advice on commercial contracts.
Our Commercial Team has the expertise and experience to advise on all areas of commercial activity, from contracts for the provision of goods and services with the public or private sector, through to complex intellectual property and technology agreements, joint ventures, outsourcing arrangements and agency and distribution issues both within the UK and cross-border.
We also ensure that our clients are aware of the regulatory issues applicable to their business practices, such as consumer protection, product liability and data protection/privacy.
Our specialists offer advice to our charity clients on a wide range of matters. We deliver both large-scale projects and assist on small or ad hoc instructions. Whatever the size of the matter, we strive to offer excellent customer service tailored to each charity client.
We regularly work with our charity clients on fixed fee arrangements. We understand that charities (more so than other clients) need to carefully manage budgets, and to cater to this we are able to offer a range of fixed fee packages to suit your needs.
We offer a range of contract review services. At one end of the spectrum, we can provide full written reports on important commercial agreements that provide detailed and contextual analysis of the implications of the provisions of the contract on a clause by clause basis.
Alternatively, we regularly undertake low cost high level contract reviews. This type of review focuses on the standard elements of a commercial agreement, including term and termination, representations and warranties, indemnification, limitations on liability, and boilerplate provisions. We would consider whether any important terms are missing and report back to you. This high level review would include a recommendation on how to proceed (for example, to walk away, accept the contract or to commence negotiations).
We appreciate that charities need to embrace digital technology both in their service delivery to beneficiaries and in staying connected with donors and stakeholders. We understand the practical and budgetary restrictions involved in implementing digital strategy and technical infrastructure projects.
We help our charity clients to transform their organisations and services through licensing agreements, fundraising agreements, cloud computing and e-commerce solutions, while ensuring they meet their statutory and regulatory obligations.
We have recently looked at a number of website development agreements on behalf of our charity clients. Some of the common pit-falls regularly encountered are set out below (many of these will be true for a wide range of technology and other trading arrangements):
- What standards will the developer be held to?
We ensure that obligations are absolute and do not allow the developer to act in its own commercial interest, so that any failure to satisfy an obligation will be a breach of contract.
- How will the developer’s performance be monitored?
Usually an agreement of this nature will include appropriate service levels, key performance indicators and service credits. If the developer’s standard terms are silent, you might not receive the service you are paying for.
- When will payment be due?
It is important that the payment obligations are carefully linked to the services being properly performed. We can assist by ensuring that the commercial contract includes appropriate acceptance testing and dispute resolution provisions.
- Are you protected in respect of third party intellectual rights infringement?
It is important to ensure that the developer will indemnify the charity against claims that the site infringes the intellectual rights of third parties. Obviously, you will need to ensure that you have chosen the right developer as the value of such an indemnity will depend on the financial standing of the indemnifying party.
- Are the limitations of liability provisions commercially reasonable?
Although it is entirely normal for a developer to seek to limit its liability, some developer standard terms will go too far. It is important that appropriate carve outs are included so that certain claims are excluded from the developer protections. For example, (i) claims under the indemnity discussed above; and (ii) claims in respect of breaches of data protection obligations.
Over the last few years, charity trading arms have been getting up to speed with consumer protection. This is important in light of increased enforcement and modernisation of consumer protection rules.
We have helped trading arms of charities with the way in which they trade with consumers, helping them to ensure that the trading terms: (i) are in accordance with consumer rights and remedies in respect of goods, services and digital content; and (ii) do not contain any unfair terms.
We undertake a significant amount of work in the heath sector for charities and wider social enterprises. We appreciate the need to make budgets stretch and where possible we point our clients towards freely available sector-based resources. For many of our clients it makes good sense to use template non-disclosure agreements, grant agreements and sub contracts rather than paying us to draft them. Legal budgets can then be utilised to get the best value for money on larger projects or bespoke arrangements.
Health sector projects will often require a ‘collaborative contracting’ approach across stakeholders that focuses on openness, trust, risk, innovation and responsibility sharing. These arrangements are often outcome based contracts that maximise the chance of success through the alignment of values and drivers. This is often called ‘alliance contracting’ and is essentially an informal joint venture where no new legal identity is created.
We have experience of advising on the formation and operation of alliance contracts and have recently advised on an alliance contracting bid agreement. For an arrangement of this nature to be successful, it is important that the contractual documentation clearly sets out: (i) the alliance objectives; (ii) the leadership structure with suitable terms of reference; (iii) appropriate levels of co-operation; and (iv) expectations for the conduct of procurement.
Independent schools letting contracts
We have recently advised on a number of lettings contracts for independent boarding schools. The utilisation of unused accommodation capacity during school holidays is increasingly becoming a valuable revenue stream for these charities. Many schools attempt to prepare their own contracts, but this can often lead to exposure to unnecessary risk. Below are some of the common pit-falls regularly encountered:
- Payment terms
It might seem obvious, but it is important to set out not only the price being paid, but also when payment is to be made. A clear timetable for payment needs to be defined and the appropriate rights included for the school if payment is not made (for example, interest on late payment and the right to terminate the contract if non-payment persists).
- Defining the property being let
Will the visitors have free-run over the whole school site, or will they be restricted to only certain areas? Defining the area let can be critical, especially if the school plans to have two or more different visiting groups on site at one time.
- Damage to property
There’s always going to be a risk that visitors will damage school property. It is, therefore, imperative to ensure that the contract contains robust mechanisms enabling the school to recoup costs incurred in remedying damage. Commonly this is achieved by the contract providing for the retention of a damage deposit or through the use of an appropriate indemnity.
- Charges on cancellation
What happens if the visiting party cancels their trip at the last minute? The school is unlikely to be able to re-let the property and will face a significant loss of profit. Carefully drafted cancellation charges can help mitigate against this risk and can act as an incentive on the visiting party not to cancel.
Who to contact
If you have a commercial contract enquiry, please do not hesitate to get in touch with your main contact in the Charities and Social Enterprise Team at Birketts and they will direct your query to the appropriate member of the team. Alternatively, please feel free to contact Paul Palik directly.
This article is from the January 2019 issue of Essential Trustee, our newsletter for charity trustees and senior management. To download the latest issue, please visit the newsletter section of our website. Law covered as at January 2019.
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