LEGAL FAQs

These are a sample of some questions we are regularly asked. Some are quite
detailed, others more general. You can find the answers by clicking on the links
below or via the FAQ index.

Health Warning:-
These FAQs are not intended to be exhaustive and do not constitute or
substitute legal advice, which should be sought on a case by case basis.
Please treat the answers as general information, not legal gospel.
Please remember that the law is constantly changing, so the answers are subject
to change in the light of new legislation or case law.
These FAQs are based on English law.

1. Is linking to other websites legal?

Existing case law does not give us a clear picture. One line of cases argues
that even deeplinking is an essential function of the web. So by putting up a
website, so the argument runs, the website owner is implicitly allowing linking.
But if the website contains a notice expressly forbidding linking, or if the
website uses technical measures to prevent it, then it is much more likely that
unauthorised deep linking will cross the boundary.
Linking – what’s the problem?
Your website almost certainly has clickable links to other sites. After all,
hyptertext links are what the Web is all about.
So where is the problem if you decide to link from your site through to web
pages on another site? If you ask Tim Berners-Lee, generally regarded as the
architect of the Web, he would say "no problem". As he puts it: "the ability to
refer to a document is in general a fundamental right of free speech to the
same extent that speech is free." (1997).
However, in Europe, we have a developing line of conflicting court cases.
These suggest that the area of greatest risk is where links are used to build a
commercial service, especially a competitive one, by ‘piggy-backing’ on the
content on the linked site.
The real message is – look at the substance of what is going on. Linking is just
a technology tool. If it is being used to create commercial advantage for free,
it carries legal risk.
Linking – the general rule
A link is simply a reference to another document. Looked at in isolation,
inserting a link to another site is unlikely to amount to copyright or database
right infringement. The same is probably true of a link that by-passes the
home page and ‘deep-links’ into the third party’s site. ‘Deep-linking’ is more
controversial. This is because of the potential loss of ad revenue caused by by-
passing banner ads on the home page.
In general, the courts seem reluctant to outlaw deep linking and have
employed several lines of reasoning to avoid injuncting the 'guilty' parties. For
example in the Dutch case of PCM v. Eureka Internetdiensten (Kranten.com)
the court rejected the argument the claims of copyright infringement because
firstly, news headlines are not subject to copyright and secondly, there were
technical measures available to the website owners to prevent the practice of
deep linking.
Linking and the linked content
But, if Sherlock Holmes was at work in cyberspace, he would tell us to consider
all the facts. This means looking at the page on the linking site and the
content to which it is linked. The German case of Stepstone v. OFiR (2001)
involved two online recruitment companies. OFiR had links on its website to
jobs stored in Stepstone's web-based jobs database website. They failed to
acknowledge that the link was taking the user to jobs listed by Stepstone and
not OFiR itself. The case was settled out of court, Stepstone used its database
rights to successfully get OFiR to change its practice.
Linking and search engines
Website operators are becoming increasingly sophisticated in their linking
strategies. Google, the well-known search engine, now operates a news
service (http://news.google.com) that is compiled solely by computer
algorithms without human intervention. It has an automated grouping process
that pulls together related headlines and photos from thousands of sources.
Each headline then links through to the third party news sit.
It is interesting to compare this service with the decision earlier this year of a
German appellate court that decided that NewsClub.de, an online news search
engine, infringed the database right of Mainpresse, by allowing NewsClub
users to link directly through to the ‘Mainpost’ newspaper database.
The case was brought against internet search engine Paperboy, which allows
for the use of key words to bring up a list of relevant press articles and
publications. The list contains hyperlinks that take a user directly to a
particular article, thereby skipping the homepage of the website where the
article is published.
Publishing house Verlagsgruppe Holtzbrinck claimed that Paperboy had
infringed Holtzbrinck's copyright and database rights in the newspaper and
magazine articles it publishes online. Holtzbrinck also claimed a violation of
the Unfair Competition Act based on the fact that deep-linking users would not
see the advertisements shown on its homepage.
The Federal Court of Justice dismissed the action. With regard to the copyright
and database right claims, the court reasoned that deep linking to a site is not
regarded as a type of use that is reserved exclusively for copyright owners or
database creators. The court held that by placing its articles online without
any technical protection, Holtz-brinck had implicitly consented to their
permissible use. Paperboy's links merely facilitated such use by users.
With respect to the unfair competition claim, the court reasoned that Paperboy
did not illegally exploit Holtzbrinck's services by offering deep links, as (i)
search engines are of substantial benefit to the public, and (ii) Paperboy did
not conceal the source of the articles. The court further reasoned that skipping
the homepage may not be regarded as unfair due to lost advertising revenue,
since website owners must accept that the public is interested in using a
website in the easiest way possible.
The court did make it clear that the practice of providing hyperlinks may be
illegal where technical security measures installed by the website owner to
prevent hyperlinks are circumvented.
Source: Kai-Uwe Plath and Lars Hombrecher, Freshfields Bruckhaus Deringer,
Hamburg
Watch this space
The issue of linking, search engines and the law is not an easy one. They can
involve issues of intellectual property rights, unfair competition and even
trespass! The court decisions in Europe are inconsistent and, in the US,
constitutional issues of free speech play a key role in drawing up the legal
boundaries. So please treat these views with caution – they are likely to
change and should not be treated as legal advice.
 If you would like a simple rule of thumb, remember the words of the Judge in a
1916 copyright case – "if it’s worth copying, then prima facie it’s worth
protecting."
2. What’s in a website?
A website is "chockfull" of legal rights. Here are some of them:

• The structure and layout of the website may be protected by copyright as

a “database” if the selection and arrangement of the site and its contents
satisfy the criterion for "originality".
• The contents of the database are likely to include copyright works e.g. text
and audio-visual material.
• The contents as a whole will be protected by the non-copyright "database
right" if it meets the "substantial investment criterion".
• The individual pages may be treated as individual artistic works for
copyright purposes.
• Trade marks on the site have their own protection under trade mark law.
3. If I commission someone to build my website, doesn't that mean that
I own it?
No. The basic rule is that the intellectual property in the site structure and
design stays with the developer. So here’s what to do:
• Ask for an assignment of copyright in the structure and design of your site
• If your developer is also hosting your site, make sure you can get access to
the source code if you need to move the maintenance or hosting of the site
to someone else.
Here is a typical clause that deals with assignment. This forms part of the
overall agreement with the Developer and is not designed to be used on a
‘standalone basis. The clause makes it clear that the Developer retains its
rights in the underlying software tools that it uses to build the site.
"[In consideration of the payment by the Client of £xxx (included in the fees
set out in Clause xxx) which the Developer hereby acknowledges] the
Developer hereby assigns to the Client with full title guarantee, by way of
present assignment of existing and future rights, all the Intellectual Property
Rights throughout the world existing in or arising out of the development and
provision of the Web Site [except in respect of the developer software] and the
Documentation TO HOLD such Intellectual Property Rights absolutely and for
the full period for which the Intellectual Property Rights subsist including all
renewals, revivals and extensions, whether such rights of renewal, revival or
extension now exist or are in the future created by laws in force in any part of
the world, and under the intent that such assignment shall be without
reservation or conditions."
4. When do I have to notify the Information Commissioner?
If you are handling personal data. Go to the Information Commissioner’s
website http://www.dpr.gov.uk/notify/4.html. It has very clear explanation
about What is Notification? It will tell you:
• Why do I need to Notify?
• Do I need to Notify?
• Do I need to renew my Notification?
• How do I renew my register entry?
 • What do I do if my notification has expired?
• Completing the notification form on the internet
• Manual Records & Notification
• How do I Notify?
• Special Guidance for Schools & Governing Bodies
• Data Controllers registered under 1984 Act
• Data Contollers who had more than one 1984 register entry
• The changes introduced by Notification
• What is the cost of Notification?
• Complete the Notification Form On-Line
5. Can I still send unsolicited emails?
The law here is complex. This is because it is a mixture of data protection law,
direct marking law and codes and the new Privacy and Electronic
Communications (EC Directive) Regulations 2003 will come into force on 11
December 2003 which comes into force on 11 December 2003.
Sending an unsolicited e-mail is 'processing' for data protection law purposes.
Your data protection policy should be designed to ensure that you can send
unsolicited e-mails in compliance with data protection principles. For example,
when you collected the recipient's e-mail address, did you notify him or her of
this type of use? Have you checked whether the recipient has registered under
the Mailing Preference Service? Has the target given you notice that they do
not want to receive direct marketing from you?
The Privacy and Electronic Communications (EC Directive) Regulations 2003
complement (and therefore "add to"!) general data protection law, but deal
specifically with unsolicited communications.
The basic rule under these Regulations is 'opt-in' i.e. you cannot send an
unsolicited e-mail unless the recipient has previously given his or consent. The
limited exception to 'opt-in' is if:
• the sender has obtained the recipient's contact details in the course of
negotiating or selling a product or service the recipient;
• the direct marketing is for similar products or services of that sender; and
• the recipient has been given a simple way of opting out each time.
The key message is that unsolicited e-mails should not be considered in
isolation but as part of your organisation's comprehensive data protection and
communication policy.
6. Can employers monitor their employees’ emails?
The answer is "yes", provided they carefully and successfully navigate your
way through a patchwork of rules and regulations.
There are two basic compliance regimes to be considered. First, the
Telecommunications (Lawful Business Practice) (Interception of
Communications) Regulations 2000 made under the Regulation of
Investigatory Powers Act 2000 (RIPA). Second, Data Protection law and
regulations, including applicable Codes of Practice.
RIPA and its Regulations deal with the interception of e-mails. Essentially,
interception takes place if the contents of the communication can be read. In
"RIPA speak" "...so as to make if some or all of the contents of the
communication ... available, while being transmitted, to a person other than
the sender or intended recipient of the communication."
Data protection law deals broadly with all types of processing of personal
information – obtaining, storage, use and disclosure. So the interception of an
e-mail that also involves the storage of information that identifies a living
individual brings the interception within the scope of data protection law.
The remaining part of this FAQ deals with the Information Commissioner’s new
Code on Monitoring. But remember – the RIPA rules and regulations must also
be followed. It was written by John Angel....
The new part 3 of the Employment Practices Data Protection Code (the Code)
on Monitoring at Work. is very significant for those businesses using electronic
communications. The Code explains that the benefits of compliance are:
• increased trust in the workplace - there will be transparency about
information held on individuals, thus helping to create an open atmosphere
where workers have trust and confidence in employment practices;
• encourage good housekeeping - following the Code encourages
organisations to dispose of out-of-date information, freeing up both
physical and computerised filing systems and making valuable information
easier to find;
• protect organisations from legal action – adhering to the Code will help
employers to protect themselves from challenges against their data
protection practices;
• encourage workers to treat customers' personal data with respect -
following the Code will create a general level of awareness of personal
data issues, helping to ensure that information about customers is treated
properly;
• help organisations to meet other legal requirements - the Code is intended
to be consistent with other legislation such as the Human Rights Act 1998
and the Regulation of Investigatory Powers Act 2000 (RIPA);
• assist global businesses to adopt policies and practices which are
consistent with similar legislation in other countries - the Code is produced
in the light of EC Directive 95/46/EC and ought to be in line with data
protection law in other European Union member state;
• help to prevent the illicit use of information by workers - informing them of
the principles of data protection, and the consequences of not complying
with the Act, should discourage them from misusing information held by
the organisation.
Electronic communications and types of monitoring
The code defines "electronic communications" as broadly telephone calls, fax
messages, e-mails and internet access. Monitoring can involve the
'interception' of such communications. As already noted. the Regulation of
Investigatory Powers Act 2000, and the Lawful Business Practice Regulations
made under it, set out when interception can take place despite the general
rule that interception without consent is against the law. It should be
remembered that - whilst the Regulations deal only with interception - the
Data Protection Act is concerned more generally with the processing of
personal information. Therefore when monitoring involves an interception
which results in the recording of personal information an employer will need to
satisfy both the Regulations and the requirements of the Data Protection Act
(DPA).
The Code identifies two types of monitoring. Firstly, employers – especially
larger organisations - using or planning some form of systematic monitoring.
This is where the employer monitors all workers or particular groups of
workers as a matter of routine, perhaps by using an electronic system to scan
all e-mail messages or by installing monitoring devices in all company
vehicles.
Secondly, occasional monitoring. This is where the employer introduces
monitoring as a short term measure in response to a particular problem or
need, for example by keeping a watch on the e-mails sent by a worker
suspected of racial harassment or by installing a hidden camera.
Impact assessment
The Data Protection Act does not prevent monitoring. Indeed in some cases
monitoring might be necessary to satisfy its requirements. However, any
adverse impact of monitoring on individuals must be justified by the benefits
to the employer and others. In order to ensure this is happening the Code
recommends that an "impact assessment" is carried out. We provide a service
which helps our clients:
• identify clearly the purposes behind the monitoring arrangement and the
benefits it is likely to deliver;
• identify any likely adverse impact of the monitoring arrangement;
• consider alternatives to monitoring or different ways to in which it might
be carried out;
• take into account the obligations that arise from monitoring;
• judge whether monitoring is justified;
The Code tries to help employers understand what could be an "adverse
impact" for example if the private emails of workers were monitored would
this be an intrusion into the private lives. It asks employers to consider
"alternatives" or different methods of monitoring for example accessing stored
emails to follow up an allegation of misconduct may be more appropriate than
undertaking continuous monitoring of emails. The "obligations" envisaged by
the Code relate to how workers will be notified about the monitoring
arrangements, access given and the information collected will be kept
securely and processed in accordance with the DPA. Making a conscious
decision as to how monitoring is "justified" involves:
• establishing the benefits of the method of monitoring
• considering any alternative method of monitoring
• weighing these benefits against any adverse impact
• placing particular emphasis on the need to be fair to individual workers
• ensuring that any intrusion is no more than absolutely necessary
• bearing in mind that significant intrusion into private lives will not normally
be justified unless the employer’s business is at real risk of serious
damage
• taking into account the results of consultation with TUs, other
representatives and workers themselves
We help our clients through the process of undertaking the impact assessment
and understanding the extent to which any existing activities will breach the
Code.
Policy for the use of electronic communications The Code recommends that
employers who monitor communications should consider establishing a data
protection policy on their use and communicate it to workers. The policy
should at least clearly cover:
 • the circumstances where workers may use email and internet use for
private communications
• the extent and type of private use allowed
• in the case of internet access any restrictions on material that can be
viewed or copied
• advise workers of the general need to exercise care about personal
information they are allowed to include in for example emails
• alternatives to say email where confidentiality is important
• lay down rules for teleworking
• explain the purposes for which monitoring is being conducted, the extent
of the monitoring and the means used
• outline how the policy is to be enforced and the penalties for any breach.
The Code then goes into more detail as to the practicalities of how the policy
should be operated. For example workers should be informed of the extent to
which information about their internet access and emails is retained in the
monitoring system and for how long.
We help our clients develop an effective monitoring policy and ensure that it is
consistent with other company policies such a disciplinary rules and
procedures. We also advise on how best to implement the policy where
appropriate using automatic technical solutions.

The Code is available from the 'Guidance & other publications' page of the
Information Commissioner's website at www.dataprotection.gov.uk.
7. Has UK copyright law changed?
Yes. As from 31 October 2003, UK copyright law is updated as a result of the
EU Copyright Directive. Perhaps "tweaking copyright law for the digital age" is
the best way of putting it. The following summary was written by Hugh Jones,
Copyright Counsel, UK Publishers Association, International Association of STM
Publishers.
• New exclusive right over communication to the public – copyright owners
are given a new exclusive right of communication to the public (including
access) via electronic transmission.
• New exception for temporary copying – Internet Service Providers and
telecommunication companies are given a new exemption from copyright
infringement for transient/incidental acts of reproduction which are integral
and essential to the technological process and not themselves of any
economic significance.
• Tighter Fair Dealing exceptions – Research (in Research and Private Study)
must specifically be for a non –commercial purpose, and Fair Dealing
continues to limit private study, and Criticism, Review and News Reporting.
• New "non-commercial" criteria for education and library copying – this
applies now to copying for Instruction and Examination, for Reprographic
copying by educational establishments, and for much library copying not
expressly covered before. Publishers are already talking to librarians about
suitable guidelines.
• Protection for Technical Protection Measures – circumvention of TPMs
remains a copyright infringement, and also a criminal offence for those
who import or manufacture infringing equipment. Exclusive licensees are
given an equal right to take action. Where TPMs prevent lawful access, eg
 for Research and Private Study, a notice of complaint may be given where
there is no voluntary measure or agreement already in place. It is hoped,
however, that industry will find a way of arranging such lawful access.
• Protection for Digital Rights Management information - knowingly removing
or altering DRM information without authority may, likewise, be both a civil
infringent or a criminal offence.
• Specific Right of Injunction against Service Providers – The High court is
specifically given the right to grant injunctions against Internet service
Providers, where the ISP has actual knowledge of infringing material on the
relevant site (particularly if the ISP has been given a Notice as envisaged
by the E- Commerce Regulations). It is hoped that a voluntary industry
Code of Practice will add to this soon with a self-regulatory scheme capable
of dealing expeditiously with the majority of infringements outside the
court system.
Conclusion
The Statutory Instrument seems broadly to follow the lines set out in the
Government’s Consultation Paper, and reflects the Government’s expressed
desire to implement the Directive "narrowly". No new exceptions have been
created, except the compulsory exception for temporary copying listed above
(which every member state must now have), and the wording of many existing
exceptions has been tightened up in accordance with "non-commercial"
criteria. A new exception for Visually Impaired People was enacted last year
and is likely to be brought into force at the same time as the S.I.
Although the above summary is a brief initial survey only, the S.I seems on the
whole to be an admirably copyright-friendly piece of legislation, like the
Directive itself, and should do much to bring the UK into line with other
leading copyright nations in the EU and beyond, in the internet age.
8. What are moral rights?
The 'Moral Rights' provisions of The Copyright, Designs & Patents Act 1988
("CDPA 88") were introduced in compliance with the U. K.'S obligations under
the Berne Convention -see Article 6 bis of that Convention. References to
section numbers below are to the relevant sections in the CDPA 88.
There are four moral rights in CDPA 88:
(i) the right of paternity i.e. the right to be identified as the author or, in
the case of a film, as director);
(ii) the right of integrity(i.e. "the right to object to derogatory treatment" of
a work e. g. a translation which "amounts to distortion or mutilation of
the work or is otherwise prejudicial to the honour or reputation of the
author or director;
(iii) the right to prevent 'false attribution' of a work;
(iv) the right to privacy in respect of certain films and photographs.
The right to paternity must be asserted in writing (Section 78).
There are numerous exceptions to both the right of paternity and the right of
integrity. The right of paternity does not apply to employee-created works, nor
where the 'fair dealing' provisions apply nor to works written for publication in
a newspaper, magazine etc.
The right of integrity has similar (but not identical) exceptions -see sections
79 &81 respectively.
It is important to appreciate that 'moral rights' are independent of the author's
economic rights in a copyright work. Thus, in principle, they continue to apply
 to the author even after he or she has assigned or licensed the work and apply
even if the author (e. g. as employee) never was the owner of the copyright.
We say "in principle" because the CDPA 88 (unlike the copyright legislation of
most other member states) provides that moral rights do not apply if the
'work' was created by an employee.
The origin of moral rights lies in the continental approach to copyright which
places paramount importance on the rights of the author. Moral rights are
designed to preserve the reputation of the author by preventing acts which
might undermine or even destroy that reputation e. g. making major and
damaging changes to a book when it is converted into a film script.
The rights of paternity, integrity and right of privacy last for the term of
copyright in the work in question. The false attribution right lasts for 20 years
after the person's death.
Moral rights are not assignable but are transmissible. Also, all moral rights can
be waived.
The European Commission may well decide to consider whether the disparities
between member states’ laws on moral rights create actual or potential
barriers to the free movement of goods or services within the Community to a
sufficient extent to warrant a harmonising directive.
9. What is "intellectual property?"
It's just an umbrella (and not very user-friendly!) term to describe a collection
of legal rights. that can only be enforced through legal action – you can't
physically re-possess your copyrights or trade marks. (You can, however, get a
court order to seize illegal copies that bear your copyright or brand if you are
successful in a legal action for intellectual property infringement).
These rights include copyright and similar rights, trade marks, goodwill,
business secrets and know-how, patents and contract rights. In e-business,
customer data is a key asset. This data can be protected through the database
right.
Your intellectual property rights will come into play when you suddenly
discover that someone is using the same, or a very similar, trade mark or logo
to your own; or your confidential business plans or data get into the hands of a
competitor; or counterfeit copies of your branded goods appear on the market.
At that point, enforcing your intellectual property rights becomes the guardian
of your company’s value.
Also, at the time of a float or trade sale, you may find that the investor asks
for an 'IP' audit and valuation to be carried out.
It's precisely at times like these that you want to be sure that your intellectual
property is fully protected.
10.Contracts – why bother?
Faced with innumerable drafts of a contract and pressing deadlines, it can be
tempting to go ahead without getting it finally agreed and signed off.
That's exactly what happened in the recent case between Co-Operative v ICL.
After protracted negotiations, ICL started work on a major IT contract for the
Co-Op before contracts were signed. Towards the end of the project, Co-Op
made complaints of significant bugs and delay and terminated the project.
The Court decided that although there were drafts of the contract, there was
no contract between the parties. No contract meant there could be no claim
against ICL for breach of contract!
 So the message is loud and clear – if you want to be able to have remedies
against the supplier if things go wrong, make sure a contract's in place before
things start!
11.What are the top 10 rules for doing business online?
1. Make sure that your content is really yours. If material on your site
has been created by freelancers or a third party design company you will
not own the copyright unless you have secured an assignment of rights
from them. The mere fact that some work has been commissioned and
paid for by you does not give you ownership of the copyright. It is
important therefore to enter into an agreement with any freelancers or
web designers clarifying ownership of the rights in the material that they
prepare.
2. And if your content is somebody else's... If you are using any
copyright material on your site which has been taken from a third party
source, it is important to obtain a clearly drafted licence from the copyright
owner. Such a licence should state the extent of the rights being granted,
whether they are exclusive and how long they will last for.
3. Watch out for distance selling regulations. UK regulations relating to
contracts completed at a distance (which includes consumer transactions
completed over the Internet) means that you must give your customers
certain information about who you are and your products or services
before entering into a contract of sale. With some exceptions, the
regulations will also give consumers a right to return online purchases
within 7 working days and receive a full refund.
4. Create some customer terms. All transactional sites should contain
clear user terms and conditions which comply with any relevant consumer
legislation. The terms and conditions must be brought to each customer’s
attention before they enter into agreements with you to purchase products
(this may impact on site design so it shouldn’t be left until the last minute).
Well-drafted terms and conditions will not only set out the customers'
rights and obligations but will also protect your rights in the site, limit your
liability to the customer and clarify which country's law will apply in the
event of a dispute.
5. ...and a privacy policy. The Data Protection Act 1998 and Regulations
made under it affect all web site owners who are collecting information on
users, whether by customer forms or use of cookies. Most importantly,
customers must be informed of the uses which will be made of any
personal information collected on a site. The best way to do this is through
a clear privacy policy accessible on the site. This will help ensure that your
future use of customer data collected from the site is not illegal.
6. Register your domain names as a trade mark. Unlike domain names,
the owner of a registered trade mark is given a statutory monopoly to use
that mark in relation to certain goods and/or services. This means easier
enforcement of your rights and serves as a notice to any other businesses
thinking of using your name. It is also advisable to check that any name
which you wish to use is not already a trade mark registered to somebody
else.
7. Ensure your access to usage data. When entering into co-branding and
partnership agreements, make sure that both parties are clear regarding
what customer usage data will be collected and which party will own that
data and/or have rights to use it. Otherwise, you may be missing out on a
valuable potential benefit under the deal.
8. ISP Support. Before signing up with an ISP, ensure that the contract
provides for proportionate and acceptable upgrade costs. Some ISP
agreements deal with upgrades as a form of early termination and others
 allow the ISP to contractually force an upgrade if bandwidth exceeds a
certain level. These types of obligations should be avoided. Also, look
carefully at your ISP service level commitments. Speak to other users to
hear about their experiences – positive or negative.
9. Remember, offline = online (but beware of the e-specifics). In
general, the laws which apply to your business in the offline world will
apply equally in the online world. However, the nature of the global
delivery medium does of course raise some specific legal issues. In
particular, keep an eye out for the wealth of new legislation this year – for
example the EU E-commerce and Electronic Signatures Directives and the
Electronic Communications Bill in the UK.
10.And it’s more than just the Web. Finally, remember in all your
contracts that you should consider the implications of other delivery media
such as mobile (GPRS, 3G, 4G and beyond) and interactive television (even
if you’re not yet exploiting those media) to ensure that the rights that you
have negotiated relate equally to any future plans you may have.
12.Contracts, contracts, contracts – 10 key deal points
Every contract is unique. A good contract reflects the respective risks and
rewards of the participants who enter into it and caters in way that meets their
respective interests.
You may find it useful to use our checklists. Click here. If nothing else, every
contract needs to deal with the following:
1. Parties. It’s not always obvious who they should be. For example, with a
group of companies it’s important to get the right contracting party. It may
be appropriate to have the parent company contract with an express
reference to its subsidiaries having enforceable rights through the
Contracts (Rights of Third Parties) Act.
2. Term. There are lots of permutations and it’s important to pick the right
one e.g. fixed period; initial period which can be renewed or which
automatically “rolls over” for further periods unless terminated; for an
indefinite period subject to notice of termination.
3. Termination and effect. This is where you have to think about the
divorce at the same time as getting married! But this can often prove to be
one of the most important contract clauses. For example, if software is
involved, does the contract deal with access to source code? Or in the case
of contracts involving other types of intellectual property, does the
contract spell out which rights can be used and by who etc.
4. Sole / exclusive / non-exclusive. If the contract grants rights (e.g. an
appointment of an agent or distributor or a licence to use intellectual
property), it is important to make it clear the basis on which they are
granted. "Sole" means that the party granting the rights can continue to
use those rights but will not permit anyone else to do so. "Exclusive"
means that the party granting the rights cannot itself use those rights nor
can it permit anyone else to do so. The grant of exclusive rights can often
raise competition law questions. "Non-exclusive" means just that – the
party granting the rights can use them and can also permit others to do so.
5. The ££. Need we say more? But there are lots of details: the basis of
calculation; currency; payment terms; payment method; right to audit in
the case of royalties, commissions and other sales-based payments; gross
or not; ex or inc. VAT – the list goes on.
6. Territory. What is the territorial scope. In the case of a contract for the
sale of goods or services via the Internet, there are still ways, contractual
and technical, to limit the geographical scope of the contract.
 7. Scope of rights. Make sure the contract is clear about the rights (and
obligations) that each party has under the contract. For example, in the
case of a sales agency contract, does the agent have power to conclude
sales or just to negotiate them?
8. Warranties & indemnities. We’re into "legal boilerplate" country here.
However, iIf you are entering into the contract in reliance on certain key
assumptions (e.g. as regards ownership of an asset, the right to grant
certain rights etc), it is vital that that are mirrored in the contract as
warranties or indemnities. The distinction between a "warranty" (e.g. "I
own the copyright in...") and an indemnity (e.g. "I indemnify you against
third party claims for copyright infringement..") is that breach of a
warranty gives rise to a claim for damages based on losses actually
suffered as a result of the breach. A claim under an indemnity on a "£ for
£" basis.
9. Exclusions & Limitations. The flipside of giving warranties is the desire
on the person giving them to try and exclude their liability for certain
things and to limit it in other areas. This is really about risk apportionment
and is a key part of the contract negotiations. For more detailed
commentary on exclusion and limitation clauses, click here.
10.Governing law & jurisdiction. "Governing law" is the law which applies
to the contract. So if it is English law, it is the rules of English contract law
that are applied to determine the meaning and effect of the contract.
"Jurisdiction" means the courts or other forum (e.g. arbitration) which has
jurisdiction to determine any dispute arising under the contract. The key
message is: make sure the contract contains an express choice of
governing law and jurisdiction.

Please feel free to copy or make available these FAQs without modification in print
or electronic form for non-commercial purposes. If you do so, please include this
disclaimer and copyright wording with attribution. If you want to re-publish or
make the whole or part of these FAQs available in a commercial service or
publication, please contact the author at laurie@laurencekaye.com.