Business Agreements and Breaches

The Different Business Agreements And Breaches That You Should Be Aware Of As A Business

Linkilaw Legal Documents

When entering the business world it is important that you are aware of the different business agreements that are needed in order to run your company. You don’t have to be a legal expert, however, you do need to have a basic understanding of how the law works in relation to your business. A lot of jurisdictions around the world will not even allow businesses to operate unless they have the right licenses and contracts in place. Thus, it is necessary to understand these basic agreements, what they are meant for, how they are used and what would happen in the event of a breach of the agreement.

Terms and Conditions

Terms and conditions are rules and regulations that are an important part of the contract which must be obeyed/followed/accepted in order to continue the agreement. Terms and conditions can often be found on websites and would often require the visitor to agree to them if they wish to use a service or purchase something from the host website. However, if you purchase something in-store the terms and conditions can often be found on the back of the receipt. Terms and conditions are important as they set out what was to happen in the relationship between the customer and the client, for example, what was to happen in the event of having a faulty product and what the return policy would be. Terms and conditions are used to protect the customer and the client from pretty much everything that can go wrong when doing business.

Terms and conditions include specific clauses such as:

  • You agree not to copy, reproduce, modify, create derivative works from, distribute or publicly display any content from the Site or Services without our prior written permission and unreservedly indemnify the business in the event that you do so.
  • You may not assign, transfer or sub-contract any of your rights under these Terms without our prior written consent. We may assign, transfer or sub-contract all or any of our rights at any time without consent.

What would happen in the event of a breach of the Terms and Conditions:

There are 4 main types of a breach that can happen in a terms and conditions; minor, fundamental, material, anticipatory. Breaches include failure to provide services on time or in full, defective work or goods, non-payment and breaches of warranties. In the event of a  breach of a Terms and conditions, the innocent party will receive damages most likely in the form of nominal damages calculated by the court. Furthermore, if there is a dispute you may need to go into dispute resolution measures such as arbitration, mediation or litigation. If this were to happen then it is most likely that the case will be settled outside of court.

Terms of Business

Terms of business is a consensus between parties in order to provide a service in line with the conditions imposed. They normally entail the customer’s obligations, charges and payment details, IP rights, limitation of liability, termination of the contract, consequences of termination, information on the governing law and the jurisdiction under which disputes are resolved.

What happens if a breach in the Terms of Business occur?

In the event that there is a breach in the terms of business, the consequences would be similar to the terms and conditions agreements. If a breach were to occur the parties are entitled to damages decided by the court, mitigation, and depending on what kind of service being provided, injunctions.

Privacy Policies

Privacy policies are a way to ensure that a customer or client’s data is managed, used and gathered in a certain way. This policy ensures that legally a customer or clients privacy is protected.

A Privacy Policy agreement should entail clauses such as:

  • The business (“we/us/our”) is committed to protecting and respecting your privacy and your personal data. This policy sets out the basis on which any personal data we collect from you, or that you provide to us, will be collected, processed and stored by us.
  • The data controller is [business name] of [business address]. We are responsible for your personal data.

What happens in the event of a breach:

If a privacy policy breach were to occur within 72 hours the supervisory authority, the Information Confirmation Office (ICO), would have to be informed. If the risk is of high level the person whose data is concerned must be informed. There must also be breach detections, investigations and reporting processes in place. Furthermore, a record must be kept of the breaches. If these are not in place when a breach occurs the company can be fined up £20 million or 4% of their profit.

Cookie policies  

A cookie is a small data file stored on the users’ browser and it tracks their search information and history in order to provide for a more tailored experience when using the web. However, due to data regulations companies are now legally required to inform users if they use cookies on their website and the user has to actively consent for them to use it.

The different types of cookies that exist:

    1. Strictly necessary cookies. These are cookies that are required for the operation of the Site. They include, by way of general example, cookies that enable you to log into secure areas of the Site, use a shopping cart or make use of e-billing services.
    2. Analytical/performance cookies. These cookies allow the company to recognise and count the number of visitors and to see how visitors move around the Site when they are using it. This helps companies to improve the way the Site works by, for example, ensuring that users are finding what they are looking for easily. All information these cookies collect is aggregated and therefore anonymous.
    3. Functionality cookies. These are used to recognise you when you return to the Site. This enables companies to personalise their content for you, greet you by name and remember your preferences (for example, your choice of language or region).
    4. Targeting cookies. These cookies record your visit to the Site, the pages you have visited and the links you have followed. Companies use this information to make the Site and the advertising displayed on it more relevant to your interests. They may also share this information with third parties for this purpose.
  • Social Media cookies: These cookies work together with social media plug-ins. For example, when we embed photos, video and other content from social media websites, the embedded pages contain cookies from these websites. Similarly, if you choose to share our content on social media, a cookie may be set by the service you have chosen to share content through.
  • Third Party cookies: These are third-party cookies on the Site that the company does not control and their Site does not block them.

What happens in a breach of cookie policies

When it comes to a breach in a cookie policy it will normally look like the host website does not have a cookie policy in place or that they haven’t complied with the General Data Protection Regulation (GDPR) that a user should be explicitly allowed to opt-in or opt-out of using their cookies. If this happens any user can report it to the ICO. If the company recognizes that there has been a breach on their part they have 72 hours to report it to the ICO, from there the company has to inform the ICO of everything that they have done to rectify the situation and comply with the data regulations.

Shareholder Agreements

Shareholder agreements are agreements made between shareholders to ensure that there is a harmonious relationship between the co-founders, this is needed for a good business foundation. This consensus can also be used to measure how the company operates.

Shareholder agreements entail the shareholders/directors duties and obligations, how any agreements or disagreements that may arise are to be resolved and protection for minor shareholders.

Provisions in a Shareholder Agreement should include:

  • Matters requiring specific shareholder consent
  • Deadlock provision
  • Transfer of shares
  • Termination

In the event of a breach of a shareholder agreement, there should be terms already in shareholder agreement stating what happens if a breach occurs. This would have been decided by the shareholders prior and it would include how the company is to be divided and run in the event of a breach. Some possible examples of things that can happen are the removal of a shareholder or resolution amidst the shareholders.

Employment Contracts

An employment agreement is an agreement between the employee and employer that states the employee’s obligations/responsibilities towards their jobs.

They entail the employees commencing date as an employee, job title in the employment, salary address of where the employee will be working, working hours, holiday entitlement, sick leave entitlement and information on when the employment terminates.

What happens in a breach of an employment contract:

One of the repercussions for the employee, if they do not follow the employment contract, is that the employment contract will be terminated and they would be let go of their job. However, if the employer breaches the contract, for example, if an employee is not receiving the sick pay that they are entitled to or the employer does not provide the required provisions for pensions then there are certain actions that the employee may be able to take against the employer. The first step is to always try to resolve things internally by communicating issues to the employer. If this does not work the employee can make a claim against the employer in an employment tribunal. After this, the matters may go beyond the tribunal to the courts. Depending on where the breach is the employee may be eligible for damages, compensation or injunctions.

Non-Disclosure Agreements

Non-disclosure agreements can be agreements between two people who are going into business together that vow not to disclose any personal information which may have been disclosed between each other. They can also be between the business and any possible employees asking them not to disclose any trade secrets.

In non-disclosure agreements, both parties are identified. Furthermore, it includes which information is confidential, the level of confidentiality the receiving party is to maintain and the terms of the agreement.

What happens when a breach in a Non-Disclosure Agreement occurs:

In the case of a breach of a non-disclosure agreement, the parties may be advised to ask for the opinion of the court who can then decree an order for the parties to follow. This may be in the form of damages, separation of union, injunctions and other solutions.

Take note about the breaches

These are just a few of the agreements that are needed in order to operate a business, however, these basic agreements should be in place early on in the business or possibly even before the business has started operating. Breaching any of these agreements can have a wide range of consequences, so it is vital that the agreements are drafted well and are well understood by the company itself and their clients.