Thirsk Winton LLP

Contracts – what you need to know

Contracts – what are my rights?

A contract can be either verbal, written, or implied. All contracts/legal agreements must embody five elements for them to be enforceable by law, these are:
Offer and Acceptance, Consideration (sufficient but need not be adequate), an intention to be legally bound by the terms and that both the parties have capacity to enter the contract.
Reneging on commercial contracts are notoriously hard to do; the Courts have ensured it is not easy to escape a commercial contract so those who are entering into the contract do not behave flippantly and do not simply ‘jump’ from the deal for a ‘better bargain’ elsewhere. This ensures more certainty for businesses. The Court therefore expects businesses to seek sound legal advice before entering them, so they know what they are signing up for. Being sued for breach of a contract can be very costly to your business and therefore any agreement should not be entered into lightly or without legal advice.

There are less rights for businesses who contract into legal agreements as they are not covered by the Consumer Rights Act, which gives a great deal of protection for individuals who contract with businesses as the Courts are aware businesses will have more financial power to gain legal advice than the average citizen.

Sir Richard Branson’s Virgin Enterprises is suing a US rail company for $251m (£182m) over its decision to drop the Virgin name from its trains.

In the case of a global corporation and brand such as Virgin entering such a lucrative commercial deal as the one with Brightline, this most likely would have involved lengthy legal negotiations to ensure all the terms were agreeable to both parties and any foreseeable circumstances accounted for.

However, no one in the world could have predicted the global pandemic of 2020 and its financial repercussions for businesses. Therefore, contracts will often have a force majeure clause which will allow a party to excuse itself from the contract should it be affected by a force outside of their control such as acts of God – which are historically linked to; flood, drought, earthquake, or other natural disaster. Epidemics and pandemics are not always included. This is now most likely to change for most contracts going forward in light of Covid-19.
In the case of Brightline and Virgin – Brightline is arguing that it is the brand ‘Virgin’ itself which has been damaged by the pandemic and should render the contract void, rather than the pandemic not physically allowing the contract to be fulfilled. This certainly appears to have the ingredients to be a landmark case. The purported damage to the brand of Virgin is allegedly caused by the Virgin having to cut thousands of jobs as part of a $1.7bn rescue plan, having to delay the launch of its first cruise ship, and closing its gyms and hotels. However, this appears to have been a necessity rather than any poor corporate governance Richard Branson was willing to use his own luxury island as collateral to help aid Virgin Atlantic.

If you are a business owner and are unsure of your rights under any commercial agreements you have entered before or during the pandemic or simply want to know how you can protect your brand or any commercial agreements going forward, then please contact the Commercial/Corporate team here at Thirsk Winton who will be happy to help.

Author Kerrie Atlee is a trainee solicitor in our company and commercial department and can be contacted on 02085054777.