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Commercial Law Update

There have been a number of developments recently within Commercial law, from updates on electronic execution of documents, the Brexit Bill that has come into place and new cases that have come to light updating the law. We have provided a brief overview on each update below.

Electronic Execution - The Interim Report

The Industry Working Group on Electronic Execution of Documents has published their interim report, which includes an analysis of the current situation (including how the formal requirements for some common documents can be fulfilled), best practice guidelines based on existing technology and recommendations for future analysis and reform. The views on best practice are:

• Agree the procedure for executing the document as early as possible in the transaction;
• Decide on the best form of electronic signature the parties wish to use. The optimal form of electronic signature for the transaction, in particular which eIDAS category should be a matter of user-choice;
• Use a signing platform with minimum security and functionality specifications and a strong audit trail to demonstrate the signatories' intention to sign;
• Consider whether additional evidence is appropriate to record the fact that a signatory is approving the document;
• Where possible, provide multiple options to vulnerable signatories so that they can adopt a method of signing that suits their needs; and
• Authentication should be easier for those with secure digital identities, but this should not be essential.

This report includes recommendations for reform which include that Qualified Electronic Signatures, particularly if underpinned by a regulated digital identity trust framework, would be capable of fulfilling the same objectives as physical witnesses; attestation of documents, such as deeds; cross-border database of permissible regulatory and execution models should be established, starting with major trading partners and many more.

The Group intends to publish its full report later this year and in the meantime we should look to review the best practice guidelines provided within this report when considering electronic signing.

Government Announces "Brexit Freedoms Bill"

The UK Government has announced that it intends to bring forward legislation in the form of a "Brexit Freedoms Bill" to make it easier to amend EU legislation that continues to apply within the UK, which is called "retained EU law". The UK left the EU on 31 January 2020 and once the transition period ended on 31 December 2020, it was at this point that all EU law ceased to apply directly in the UK. The EU law that did apply to the UK at the end of the transition period was automatically imported directly into UK domestic law under the European Union (Withdrawal) Act 2018.

On 31 January 2022, the UK Government published a press release and an accompanying policy paper announcing the Government's intention to bring forward a Bill to:

• Ensure that retained EU law can be more easily amended or repealed;
• End the special status of EU law in the UK legal framework; and
• Make any further changes recommended by the Government's retained EU law status review.

To introduce the changes described, the Bill would need to amend or repeal provisions of the European Union (Withdrawal) Act 2018. We will need to see exactly what any new legislation says to understand the precise implications for the UK's legal landscape moving forward. The new Bill will need to be brought before Parliament and debated in the usual manner before it becomes law and we will provide further updates on this in due course.

Changes to Auto-Renewal Practices for Xbox Players

In March 2019, the Competition and Markets Authority ("CMA") opened a consumer law investigation into the supply of online gaming memberships by several online gaming companies such as Nintendo Switch, Sony PlayStation and Microsoft Xbox. The investigation arose from concerns that the gaming companies' business practices breached consumer protection law in their use of auto-renewals with its customers. On 26 January 2022, the CMA announced that it had secured undertakings from Microsoft to change its auto-renewal practices for online Xbox players.

The changes relate to Microsoft's practices in relation to the automatic renewal of contracts for online gaming services. Microsoft's products are offered as memberships which are often entered into on an auto-renewal basis. This means that membership is automatically rolled over at the end of each contract period and the customer is charged unless they actively take steps to stop the subscription.

In response to the CMA investigation, Microsoft has undertaken to:

• Provide more transparent upfront information to help customers understand their membership;
• Contact existing customers on recurring 12 month contracts and give them the option to end their contract;
• Contact existing customers who have not used their membership for a long time but are still paying; and
• Provide clearer notification of future price increases and ensure customers know how to disable the auto-renewal.

Other companies offering memberships and subscriptions that auto-renew should take note of the above and review their practices to ensure they comply with consumer protection law.

Case Law Update: Time was of the essence…

In the case of Pharmapac (U.K.) Ltd v HBS Healthcare Ltd [2022] EWHC 23 (Comm) the High Court has held that the buyer of facemasks was entitled to terminate the supply contract when a delivery was made late, because time was "of the essence". This case concerned a contract under which Pharmapac agreed to buy facemasks from HBS for onward supply during the Covid-19 pandemic. HBS had arranged to procedure the facemasks from production facilities in India.

The contract was for the supply of a total of 5 million masks by ten weekly instalments. Delivery of the first batch was to be by a specified date with nine further 'weekly' shipments with no specified date, or stipulation as to by when each week delivery must be made. The contract did not specify the number of masks to be included within each shipment nor did it say that the time for delivery was essential, or a condition of the contract, or address the consequences of failure to deliver on time. Only the first instalment was delivered and the following shipments were all delayed when the Government of India imposed restrictions on the export of facemasks out of India.

Pharmapac claimed that "time was of the essence" of the contract and so purported to terminate it and withheld payment. HBS argued that the contract did not state that time was not of the essence and that Pharmapac was not, therefore, entitled to walk away from the arrangement.

It was found by the court that time was of the essence in this case. The judge advised there was no presumption of law that stipulations as to the time for delivery are of the essence of a commercial contract. The judge also went on to reject HBS's argument that Pharmapac had delayed too long in accepting HBS's repudiatory breach and as such elected to waive its right to treat itself as discharged from any further performance.

The decision is a useful reminder of when delivery will amount to a condition of a contract and the need to draft commercial contracts carefully, in particular, to set out any stipulations as to timing (be it for deliveries or otherwise) in detail. It is always preferable to set contractual arrangements out formally and in a sensible level of detail.

The Commercial department at Forbes Solicitors are specialists in executing, drafting and reviewing documents, and regularly assist advising on contracts for companies. If you have any questions regarding this or require assistance with any contracts then please contact a member of our Commercial department via our online Contact Form.

For more information contact John Pickervance in our Commercial department via email or phone on 0333 207 1134. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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