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Watch out for the fine print – again!
Elizabeth Wilkinson
A business’s terms and conditions can be a life saver if care is taken when drafting them. Of the many points which ought to be considered, addressing the fixed recoverable costs (FRC) regime introduced in the courts recently should be high on the list.
We have just passed the first anniversary of the courts’ confirmation of the right for parties to contract out of the FRC regime. It is a timely reminder to check your own t’s and c’s to make sure they protect your business and also to check any t’s & c’s which your suppliers send to you.
Of course, no one likes to think about what should happen if things go wrong, especially at the outset of a contract when the parties are eagerly anticipating all the potential benefits. That said, some preparation could save a lot of money further down the line.
To recap, the FRC regime was introduced in 2023 for most claims worth up to £100,000. It means that the court will limit how much the winning party can recover in legal costs from the losing party no matter how necessary the costs are. The limits are, to put it mildly, arbitrary. In April 2024, however, it was confirmed that parties are free to ‘contract out’ of the FRC regime, in other words to agree they would be able to claim costs over and above the FRC regime limits.
This is a highly desirable contractual right to have when you are on the winning side. Conversely, if a business anticipates being on the wrong side of the argument, staying inside the FRC regime could limit its financial exposure.
How Bermans can help
Our litigation team have a wealth of experience in helping clients experiencing difficulties due to t’s and c’s. Prevention is always better (and cheaper) than the cure. Our commercial team are experts in drafting business specific t’s and c’s which will protect your business.
Example case
We were recently asked to help a corporate client who had over a period of 14 years, had entered into 3 overlapping and simultaneously conflicting agreements with a distributor company overseas. The first one-page distributor agreement referred to standard t’s and c’s.
Unfortunately, the agreement referred to one year’s notice to terminate whilst the standard t’s and c’s referred to 3 months. Five years later, a stock consignment agreement was signed with auto renew provisions every year unless terminated on 3 months’ notice. No mention of the first agreement. Nine years later, the same parties signed up to a distributorship agreement which explicitly sought to incorporate and continue with the first agreement and its terms.
We were asked to work out which terms were valid and negotiate a settlement. Fortunately, the settlement proved easier to work out than the strict contractual position!