Purchasing Contracts is intended to be of assistance to those whose work is with contracts for the procurement of goods and services.

Graham Fuller is a visiting lecturer on procurement law and other subjects at the WMG an academic multi-disciplinary unit at the University of Warwick; and a regular presenter at conferences for the Institute of Purchasing and Supply.

As a graduate in law he was called to the bar and practised for seven years until he became Senior Crown Counsel to the Hong Kong Government. He later became Senior Legal Adviser to Rolls-Royce plc, advising on matters including international joint ventures, technology transfers and purchase contracts.

Contents      iii

Tables of authorities. xv

Preface      xxi

About the author. xxii

CHAPTER 1:    Written contracts and the purchaser. 1

1.1              Oral contractsand those made by conduct 1

1.2              Some contracts have to be in writing. 1

1.3              Commercial purchase contracts. 2

1.4              The benefits of written contracts. 2

1.5              Written contracts and disputes. 4

1.6              The golden rule in writing a contract 5

1.7              The consequence of having contracts in writing. 5

CHAPTER 2:    Prior commitment 7

2.1              The need to place sub-contracts before the prime contract 7

2.2              Working upon a speculative basis. 7

2.3              A sense of security. 8

2.4              Termination for convenience clauses. 9

2.5              Exclusions from the termination for convenience clause. 10

2.6              Limitations of liability for termination.. 10

2.7              Partnership.. 11

CHAPTER 3:    Misrepresentation. 13

3.1              The nature of a misrepresentation.. 13

3.2              Rescission.. 13

3.3              Bars to rescission.. 13

3.4              Damages for misrepresentation.. 14

3.5              Different kinds of misrepresentation.. 14

3.6              Damages in lieu of rescission.. 15

3.7              Summary of remedies for misrepresentation.. 16

3.8              Controlling liability for misrepresentation.. 16

3.9              Exemption clauses and misrepresentation.. 17

3.10           Entire agreement and prior representation clauses. 17

3.11           Effectiveness of prior representations provisions. 18

CHAPTER 4:    Formation of written contracts and the battle of the forms  21

4.1              Different kinds of written contracts. 21

4.2              Standard terms of sale and of purchase. 22

4.3              Let battle commence. 23

4.4              Putting standard terms in other documents. 24

CHAPTER 5:    Negotiating the contract 27

5.1              The golden rule. 27

5.2              Getting ready. 27

5.2.1       What has already been said?. 27

5.2.2       A team leader. 28

5.2.3       Personalities. 28

5.2.4       Solo negotiators. 29

5.2.5       Whose draft?. 29

5.2.6       How tough should the draft be?. 30

5.2.7       Make sure it all goes in the contract 31

5.2.8       “Parking” a draft clause. 31

5.2.9       Supporting the troops in the front line. 31

5.2.10     Partnership.. 32

CHAPTER 6:    Simplicity and clarity in contract drafting. 33

6.1              Improving presentation.. 33

6.2              20 tips for drafting better contracts. 33

6.2.1       Short paragraphs. 33

6.2.2       Break concepts down by tabulation. 33

6.2.3       The use of different paragraph widths improves the appearance of a contract and makes it reader friendly. 34

6.2.4       Defined terms are useful drafting tools. 34

6.2.5       Certain definitions are unnecessary because of section 61 of the Law of Property Act 1925  35

6.2.6       There is no need to state the obvious. 35

6.2.7       Here is another bad habit: 35

6.2.8       Is it better to say: 36

6.2.9       Be consistent. 36

6.2.10     Try to avoid unnecessary work. 36

6.2.11     If the contract is complex a recital may help. 37

6.2.12     Avoid archaic expressions such as: 37

6.2.13     Signatures. 38

6.2.14     Try to avoid the following: 38

6.2.15     Consider singulars and plurals. 38

6.2.16     Anxiety expressions. 38

6.2.17     The use of numerals or words to express numbers. 39

6.2.18     Contracts should be expressed in the active and not the passive voice. 40

6.2.19     Keep any choice of law clause simple. 40

6.2.20     Take particular care with notices clauses. 40

6.3              Words may not always bear their dictionary meaning. 41

6.4              Good drafting wins respect 41

CHAPTER 7:    The specification. 43

7.1              The function of the specification.. 43

7.2              The duty to conform is strict 43

7.3              Purchase managers cannot ignore the specification.. 44

7.4              The draftsman’s eight duties. 44

7.4.1       To make it crystal clear to the experts who are responsible for the contract specification that all the purchaser gets for its money is what is set out in the specification.. 44

7.4.2       To ensure that the specification is sufficiently definite. 44

7.4.3       To scrutinise closely the specification for gaps. 45

7.4.4       To make sure the specification recognises any peculiarities of the goods and/or services that are being purchased   45

7.4.5       To see if there are matters contained in the specification which are also covered in other parts of the contract 45

7.4.6       To consider the special position of specifications for goods which contain references to performance  46

7.4.7       To be sure that in a contract for services sufficient details of the services are set out in the specification and that it has been made clear to the supplier whether there is anything out of the ordinary  46

7.4.8       To make sure that the experts have not over-specified the goods or services  46

7.5              Entire agreement and prior representation clauses. 47

7.6              Conflict and precedence. 47

CHAPTER 8:    The Sale of Goods Act 1979. 49

8.1              The history of the Sale of Goods Act and its amendments. 49

8.2              Application.. 49

8.3              The function of the SGA.. 50

8.4              Formalities. 50

8.5              Price. 51

8.6              Conditions and warranties. 51

8.7              Purchaser’s acceptance of goods. 52

8.8              Title. 52

8.9              Transfer of title and risk. 54

8.10           Performance. 55

8.11           Other matters. 59

CHAPTER 9:    The Sale of Goods Act 1979 – description, quality, fitness for purpose and samples  61

9.1              Correspondence with description.. 61

9.2              Quality and fitness. 61

9.3              Liability for quality and fitness only for business sales. 62

9.4              Aspects relating to quality. 62

9.5              Where the condition will not be implied.. 63

9.6              Statements may impact on the quality of goods. 63

9.7              Fitness for purpose. 64

9.8              Sales by sample. 64

9.9              Slight breaches of the conditions: restrictions on rejection.. 66

9.10           The de minimis principle. 67

9.11           Alternative remedies. 67

CHAPTER 10:  The Supply of Goods and Services Act 1982. 69

10.1           A statutory framework for contracts not covered by SGA.. 69

10.1.1     Contracts for the transfer of title to goods. 69

10.1.2     Obligation to transfer good title. 70

10.1.3     An obligation that goods will correspond with their description            70

10.1.4     Quality and fitness. 71

10.1.5     Transfers of goods by reference to sample. 71

10.1.6     Slight breaches of the conditions: restrictions on rejection.. 72

10.2           Contracts for the hire of goods. 72

10.2.1     Contracts of hire covered by the SGSA.. 72

10.2.2     Bailor must have right to transfer possession.. 72

10.2.3     Conditions in hire contracts as to description, quality, fitness and samples  73

10.2.4     Slight breaches of the conditions: restrictions on rejection.. 73

10.3           Contracts for the supply of services. 73

10.3.1     Service contracts to which SGSA applies. 73

10.3.2     Service quality. 73

10.3.3     Acting in the course of a business. 74

10.3.4     The duty to use reasonable care and skill is not classified.. 74

10.3.5     The service provider does not have to be the best in the world.. .... 74

10.3.6     Time for performance. 75

10.3.7     Price of the service. 76

10.4           Excluding the Act 76

CHAPTER 11:  Contracts for services. 77

11.1           Quality. 77

11.2           Service specifications. 77

11.3           Policing service contracts. 78

11.4           Termination rights. 78

11.5           One-off services. 79

11.6           Milestones and periodic reports. 79

11.7           Failure to complete the service. 80

11.8           Late performance. 81

11.9           Subcontracting. 83

11.10         Intellectual property rights. 83

11.11         Fidelity. 83

11.12         Price. 84

11.13         The purchaser’s duty to the supplier. 84

CHAPTER 12:  Exemption clauses and the Unfair Contract Terms Act 1977  85

12.1           Definition of an exemption clause. 85

12.2           The approach of the courts to exemption clauses. 85

12.3           The Unfair Contract Terms Act 1977. 86

12.4           ‘Dealing as consumer’ 86

12.5           UCTA only applies where the defendant has a business liability. 87

12.6           Excluding liability for negligence. 88

12.7           Exemption clauses generally. 89

12.8           Standard terms of business. 90

12.9           Exemption clauses relating to title and similar. 90

12.10         Exemption clauses relating to correspondence of goods with description or sample or as to quality or fitness for purpose. 91

12.11         The requirement of reasonableness. 92

12.12         The onus of proof of reasonableness. 94

12.13         International supply contracts. 94

12.14         Choice of law... 95

12.15         Purchasers seeking to rely on exemption clauses. 96

12.16         The value of UCTA in contract negotiations. 96

12.17         Other restrictions on exemption clauses. 97

CHAPTER 13:  Late delivery — no delivery. 99

13.1           Time of delivery or performance. 99

13.2           Where no time is stated.. 99

13.2.1     Different legal effects. 99

13.2.2     Termination for delay. 100

13.2.3     Delivery at a reasonable hour. 101

13.2.4     Time being of the essence. 101

13.2.5     Where only part is delivered.. 102

13.2.6     Where the contract provides for instalment deliveries. 103

13.2.7     Contracts for services. 104

13.3           Excusable delay. 105

13.3.1     Excusable delay clauses. 105

13.3.2     Qualifying an excusable delay clause. 106

13.4           A promise to try rather than one to commit 106

13.5           Frustration of contract 107

CHAPTER 14:  Payment 111

14.1           Advance payments and credits. 111

14.2           The purchaser who fails or refuses to pay. 112

14.3           Liens. 113

14.4           Reservation of title. 113

14.5           Method of payment 115

14.6           Interest on late payments. 116

14.6.1     Commercial attitudes. 116

14.6.2     The scheme of the Act 117

14.6.3     Interest on advance payments. 118

14.6.4     Excluding the Act 119

14.6.5     Avoiding statutory interest by long credit periods. 120

14.6.6     Calculating the amount of statutory interest 120

14.6.7     Fixed sums in addition.. 120

CHAPTER 15:  Assignment and subcontracting. 121

15.1           Assignment 121

15.1.1     The history. 121

15.2           Section 136 Law of Property Act 1925. 121

15.2.1     Equitable assignment 122

15.2.2     Inability to assign due to identity. 122

15.3           Subcontracting. 123

15.3.1     A general right to subcontract 123

15.3.2     Inability to subcontract due to identity. 124

CHAPTER 16:  Amendment and Novation. 127

16.1           Contract amendment 127

16.1.1     The nature of a contract amendment 127

16.1.2     Amendments and the need for consideration.. 127

16.1.3     Oral agreements to written contracts. 129

16.1.4     Amendment clauses. 129

16.2           Novation.. 130

16.2.1     Novation agreements. 130

16.2.2     Novation by conduct 131

CHAPTER 17:  Privity of contract and the Contracts (Rights of Third Parties) Act 1999  133

17.1           The doctrine of privity. 133

17.2           Rights and duties. 133

17.3           Exceptions to privity. 134

17.4           Agency as a means of avoiding privity. 134

17.5           The Contracts (Rights of Third Parties) Act 1999. 135

17.6           Crystallisation of third party rights. 136

17.7           Third party is subject to the same defences and rights. 138

17.8           Third parties relying on exemption clauses. 139

17.9           Excluding the provisions of the Act 140

CHAPTER 18:  Damages for breach of contract 141

18.1           Damages in addition to or in place of termination.. 141

18.2           The object of damages. 141

18.3           No loss no damages. 141

18.4           Nominal damages. 142

18.5           Remoteness of damage. 143

18.6           Exceptional losses of profit 145

18.7           Exemption clauses. 145

18.8           Mitigation.. 146

18.9           Heads of damage. 147

18.10         Damages for annoyance and distress. 147

18.11         Liquidated damages. 147

CHAPTER 19:  Other Remedies for Breach of Contract 151

19.1           Specific performance. 151

19.2           Injunctions. 152

19.3           Interim and ex parte injunctions. 154

19.4           Damages in lieu of an injunction.. 154

19.5           Action for an account 155

19.6           Modern injunctive remedies. 155

19.6.1     Mareva injunction (“freezing order”) 155

19.6.2     Anton Piller order. 155

19.7           Rectification.. 156

19.8           Remedies of an unpaid seller of goods. 156

CHAPTER 20:  Dispute Resolution and limitation of actions. 157

20.1           Discussion.. 157

20.2           When talks break down.. 157

20.3           They’re not getting away with it 158

20.4           Arbitration.. 158

20.5           Litigation.. 158

20.6           Civil Procedure rules and protocols. 159

20.7           The advantages of arbitration.. 159

20.8           Disadvantages of arbitration.. 160

20.9           Advantages of litigation.. 160

20.10         Adjudication.. 161

20.11         Mediation and conciliation.. 161

20.12         Limitation of actions. 162

CHAPTER 21:  Intellectual property rights. 163

21.1           The nature of IPR.. 163

21.2           The owner of IPR.. 164

21.3           Patents. 164

21.4           Copyright 165

21.5           Database right 167

21.6           Designs. 168

21.6.1     UK registered design.. 168

21.6.2     EU registered design.. 169

21.6.3     Transitional Provisions. 169

21.6.4     Unregistered design right 170

21.6.5     Unregistered design right in the UK.. 170

21.6.6     Unregistered design right in the EU.. 170

21.7           Trade marks. 170

21.8           Restrictions on passing off 171

21.9           A purchaser’s rights in a supplier’s IPR.. 172

CHAPTER 22:  Confidential information. 175

22.1           The nature of confidential information.. 175

22.2           Different kinds of confidentiality. 175

22.3           Trade secrets. 176

22.4           Information needing express protection.. 176

22.5           General know-how... 176

22.6           The purchaser and confidential information.. 177

CHAPTER 23:  Electronic commerce. 179

23.1           Purpose of this chapter. 179

23.2           Definition of e-commerce. 179

23.3           Misconceptions concerning e-commerce. 179

23.4           Offers, acceptances and invitations to treat 180

23.5           Whose terms apply?. 182

23.6           What happened to Argos. 182

23.7           Framework agreements. 183

23.8           Other considerations. 183

23.9           Electronic Communications Act 2000. 184

23.10         Regulation of Investigatory Powers Act 2000. 185

23.11         Consumer Protection (Distance Selling) Regulations 2000. 186

23.12         Electronic Commerce (EC Directive) Regulations 2002. 186

23.13         Provisions of the Electronic Commerce Regulations. 187

CHAPTER 24:  Purchasing by Public Bodies and Utilities. 189

24.1           The directives. 189

24.2           Incorporation of the directives into the laws of the UK.. 189

24.3           The Public Contracts Regulations. 190

24.3.1     Application.. 190

24.3.2     The need to advertise. 191

24.3.3     The extent of the need to comply. 191

24.3.4     Different procurement procedures. 191

24.3.5     Choice of procedure. 194

24.3.6     Minimum Timescales. 194

24.3.7     Excluded procurements. 195

24.3.8     Standstill periods. 195

24.3.9     Framework agreements. 196

24.3.10  Ineligibility for award.. 196

24.3.11  Basis for contract award.. 197

24.4           The Utilities Contracts Regulations (“UCR”) 197

24.4.1     A more relaxed regime. 197

24.4.2     Thresholds. 198

24.5           The New Remedies Directive. 198

CHAPTER 25:  Purchasing abroad. 201

25.1           Choice of law... 201

25.2           International contract law... 202

25.3           Choice of jurisdiction.. 203

25.4           International arbitration.. 203

25.5           Delivery. 204

25.6           Export licences. 204

25.7           Payment 206

25.8           Legal personality. 206

25.9           Language. 207

CHAPTER 26:  Ethics in purchasing. 209

26.1           Duties of an employee as the employer’s agent 209

26.1.1     Secret profits. 209

26.1.2     Safeguarding property. 211

26.1.3     Conflicts of interest 211

26.1.4     Diligence. 211

26.2           Criminal liability. 212

26.3           New laws. 213

26.4           Corruption and codes of conduct 213

26.5           An anti-corruption culture. 214

26.6           The whistleblowers’ charter. 214

APPENDIX 1:  Selected cases from the law of contract 217

APPENDIX 2:  Damages – betterment or compensation?. 225

APPENDIX 3:  Parking on the pavement 227

APPENDIX 4:  Regus – a case study. 229

Index      233

Graham Fuller's book would be a useful addition to any purchaser s library. It deals in a logical manner with all of the law a buyer is likely to encounter.