Business Growth Club member Ryan Cracknell, talks to founder Neil Foley about all things ‘legal’ that small business owners must tackle.
“Please note that whilst legal matters are discussed in this Podcast, this is for general informational purposes only and its contents do not amount to legal advice. Specific legal advice should be obtained on a case by case basis in relation to your commercial law requirements.”
Neil Foley: Welcome to the first Business Growth Club podcast. My name is Neil Foley, founder of the Business Growth Club, a club aimed squarely at helping micro- and small business owners looking to grow. The purpose of these podcasts is to share the experience and knowledge of our members, thereby helping other business owners.
In this particular podcast, we’re looking at an often neglected area, namely how important it is to have legal contracts in place. We will share with you top tips and advice that will make you think and take action to protect yourselves.
We’re very fortunate this morning to have a lawyer with us who specialises in contract law and works with business owners here in Norfolk in East Anglia. Welcome to Ryan Cracknell, managing director of Cracknell Law here in Norwich. Thanks for agreeing to help and share your knowledge and experience.
Ryan Cracknel: Thanks, Neil. Thanks for having me.
Neil Foley: Okay, let’s get straight to the meet of the subject, Ryan. Why is it important for business owners to have legal contracts and agreements in place?
Ryan Cracknel: I think the main point is certainty. You want to have a very clear position on what your rights and obligations are between your customers and suppliers. Ultimately, you want to reduce your legal risk and exposure to them. By having a clear set of terms, conditions, or an agreement that is fit for purpose for that situation, whatever the transaction is, it just ensures that each party knows where they stand. If something goes wrong, you know what the position is without having to go through the court process, hopefully.
Neil Foley: Hopefully. That makes life easier, doesn’t it? When you say fit for purpose, are there different ones for contracts if you’re B2B or B2C; are there different terms of businesses that you would have?
Ryan Cracknel: Yes, potentially. When you have a consumer relationship, there are different terms which need to be considered. There’s a huge amount of consumer legislation which dictates how you have to deal with consumers. For example, cancellation rights. You have to offer consumers cancellation rights. Most of the time, it’s 14 days. It does depend slightly on what the goods and services you’re providing, so some exceptions.
For businesses, you can basically agree whatever terms you like. There’s not too many terms implied by law. Basically, it comes down to bargaining strategies between the parties then, whereas consumers, it is more grounded in legislation and case law.
Neil Foley: Presumably constantly changing legislation. I think May next year isn’t it, there’s some quite big changes to the data protection rules?
Ryan Cracknel: Yeah, so the new general data protection regulations are coming to force. It is an EU regulation but will still have effect in the UK even after Brexit. The law does change all the time. Laws like that, you do have to be aware of because data protection regulations have teeth. There’ll be significant fines if you breach those protection laws.
It’s good to be mindful of things, watch out for developments. Obviously with Brexit, we’re not quite clear in terms of how it will all change, but there’s going to be a hell of a lot of e-laws which will need to be embodied in UK law somehow. Positions could change, which keeps things fun for me.
Neil Foley: True. This may sound like a silly question, Ryan, but what is the definition of a business? B2B sounds straightforward, but if you’re dealing with somebody who’s self-employed or they are a partnership, is that the legal definition or is there a legal definition?
Ryan Cracknel: SSo if you are acting on behalf of a business, you’ll be treated as being a business. If you’re a partnership, for example, it would meet the criteria. Self-employed, you’d have to view it on a case-by-case basis potentially. You’d have to look at some specific definitions within the consumer legislation. I can’t think of them off the top of my head, but I think if you’re generally acting on behalf of business in the course of business, you’ll be treated as a business rather than a consumer.
Neil Foley: Right, okay. Is that true, I don’t know if this is your area or not, in terms of the data protection as well? There’s different rules aren’t there regarding B2C and B2B. I wonder what the definitions are there?
Ryan Cracknel: Sorry, in terms of?
Neil Foley: In terms of you’re supposed to have the unsubscribe if you’re doing email marketing to people. You’ve got to give them the option to unsubscribe. I think that’s less clear when you’re a business, but again it’s the definition of a business that I think is quite interesting.
Ryan Cracknel: I think with data protection, it’s across the board.
Neil Foley: Oh, okay.
Ryan Cracknel: It would apply, basically what the information commission’s office who are the authority in the UK for data protection is ensure that any personal data that’s in the public domain is treated in a correct way. Even if you’re acting as a consumer if you obtain third-party email addresses, telephone numbers, the list goes on, but essentially, you would need to protect that information.
One of the things people sometimes fall foul of is they’ve got business information like a business email address or a business telephone number, even if it’s in the public domain, because it can be linked to a living individual, it’s still treated as personal data. It needs to be treated in the same way.
Neil Foley: Oh, okay. Crikey, so it’d be very easy to fall foul with that then, wouldn’t it?
Ryan Cracknel: Yeah. It’s important that you’ve got privacy policies in place which say how you manage personal data. That just ensures that you’re covered from a legal perspective, just because if you’re investigated by the ICO, you can say, “Well, I have thought about how I manage personal data, and this is how I deal with it. I don’t keep it longer than I need to,” for example.
Neil Foley: Is that what you should have on your website then?
Neil Foley: You don’t see that many websites with privacy policies on there, do you?
You ideally need to have consent from users on your website to agree to cookies. You see on a lot of site you get the cookies pop-up and I agree, and people just ignore it. There’s discussions at the moment to do away with that, but you’ll still need to have a cookies policy.
Neil Foley: Crikey. There’s good work for you, isn’t it? There’s plenty around, Ryan, by the sound of it
Ryan Cracknel: Yeah, and like I said, we’ve tried to build a contract package which gives you terms and conditions and all your website policies into that-
Neil Foley: Oh, so it’s easier, then?
Ryan Cracknel: Yeah. We’ve identified that there are key documents for each business and tried to adapt ourselves to cover that on a cost effective basis.
Neil Foley: Having been in the law for a while, Ryan, what are the mistakes that you see people making time and time again?
Ryan Cracknel: I do see a lot of errors, and when it goes wrong, it can go really wrong. I guess first thing is the copy and paste predicament as I like to call it. People who have just obtained some terms offline, could be from a competitor’s website, and they may change them slightly. Ultimately, it’s easy not to know what you’re looking at. I’ve seen several occasions where customers have copied terms, and they’re governed by completely different bodies of law. US law, Canadian law, you name it.
The reality is if it was ever an issue with those terms in the commercial agreement, you would have to go to the US to enforce the terms or you’d go into the UK courts if you can to apply US law. They may well say, “No way, you should have got it right.” There’s no need to create that kind of uncertainty.
As I said, there’s a choice about also jurisdiction. You could say, “This agreement is governed by the exclusive jurisdiction of the courts of Florida.” You’re remedy then is only to be able to go there. Even if you did do that, they’d probably say, “Well, the services are being provided in England, why are you doing?” It’s an easily-avoided issue.
Other things where people have copied contracts and not read through them properly and they’ve left contact details in for other businesses. Again, it just looks unprofessional. If you’re sending these terms to your clients and you’ve got a completely different business contact email, it just shows you haven’t put the effort in, and could also have breach issues in terms of that party approaching you if they find out they’ve copied your terms. Again, all easily avoidable.
I’ve had a few other situations where it’s gone really wrong as well. You can pay quite significant amounts to have your terms done for you. Again, if you don’t pay attention to what’s being created for you, they could be completely wrong. For example, had I client who paid a significant amount to have terms and conditions business created for them, but they’re completely focused on goods rather than services. Again, having that clarity about what your rights and obligations are key, and they’re completely skewed because this wasn’t applicable to the services being provided, in which case if that does go wrong, you can’t enforce.
Another thing is that if you copy terms from somewhere else, then they may be a pro customer agreement. You don’t know. You also don’t know how many times it’s been copied from somewhere else!
Neil Foley: The mistakes could be compounded.
Ryan Cracknel: I think it’s easy to get your terms sorted or viewed by someone, not necessarily me, but it’s worth spending a little bit to get it right than spend a lot down the line trying to remedy the situation because you’ve got incorrect terms or inappropriate terms. Therefore you’re exposed financially.
Neil Foley: One of the dilemmas, isn’t it, for small business owners, especially when you’re relatively new, is cash is always tight. I guess the old perception may be of the old school of lawyers is an hourly rate and it could be a bottomless pit. You mentioned you do fixed contracts in terms of fixed price, the package
Ryan Cracknel: That’s correct, yeah. We call it a contract health check. If you’ve got your own documents already created, we’ll go through them, review them, update them. Or, we can create brand new documents. We also have a startup, because we appreciate that small businesses when they’re starting up, they don’t want to invest all of their cash into legal documents, and they shouldn’t do. They should be focusing on building their own business. We try to make our services more accessible to businesses.
Ultimately, we want to ensure that they’re legally covered. I’ve seen a number of different occasions where I’ve worked with clients and they’ve spent 1,000 pounds plus that with a quite large top 100 UK law firm. They gave them a 10-page nondisclosure agreement, which had some errors in it.
When I reviewed it and it just wasn’t fit for purpose because the client just wanted to have a short document they could supply to a customer to have a confidential discussion. They don’t want to be having to say, “Read this 10-page document,” because it’s just not practical to do so.
My Non Disclosure agreement is a page and a half, just to put it in context. It cost a fraction of the price. It’s not always the best route to go to bigger firms. Although majority of them will do a good job.
Neil Foley: Yeah, I guess that’s where, because you specialise, it helps, doesn’t it?
Ryan Cracknel: Yeah. You do find there’s not a huge amount of commercial lawyers around. You do get people who dabble in certain areas of the law. They may be a personable areas of the law as they say. You do run the risk that they’re not an expert in that field.
For example, I had clients where they’ve had terms and conditions created, but they were a consumer-facing business, and there was nothing about consumer terms. As I mentioned earlier, there are specific things that you need to address like cancellation rights just weren’t addressed at all. Actually, those terms would fall foul of legislation-
Neil Foley: Bottom line, I guess that means you can’t enforce, does it, if your terms of business are invalid?
Ryan Cracknel: Well, they’re open to be challenged by your customers and therefore, yeah, it’s going to be more difficult to enforce them. The court’s not going to be impressed if it gets to that point. It’s worth getting someone who’s specialised in commercial or contract law to look over them just to make sure they are fit for purpose.
What I try to do is spot the issues before they arise to avoid this prolonged process of if you have a dispute, the worst thing is when you get a claim falling through the door. Having clarity on terms-
Neil Foley: Yeah, it makes it easier. For instance, about terms of business on my website, people presumably have to accept the terms and conditions before they move on to actually complete the contract, is that the process it needs … You can’t do it after the event for …
Ryan Cracknel: No. It’s about notice of the terms. When you engage with a customer or supplier for a contract, particularly if it’s an e-commerce site for example, you do need to have a very clear notice that these terms will apply at the point when the contract is made. For websites, that’s where you see the, “Tick here to accept these terms.” Most people won’t click on to actually view the terms, but that’s just to ensure that the customer is aware of the terms binding on them at that point. When the transaction is affected, those are the terms that apply.
There’s a number of different ways to incorporate your terms. You may want to reference your terms or conditions in quotations or proposals. It, for example, would be for the e-commerce websites, you may also want to send a copy of the terms with your confirmation email. There’s a number of ways to do it, but essentially, you need to ensure the terms are sufficiently brought to the customer’s attention at the point when the contract is made.
Neil Foley: Okay. This is a layman’s approach here, and I’ve heard it said that terms of business can’t be unreasonable or unfair. Therefore, when I’m being issued terms of business, there’s a bit of me that says, “Is there any point in me reading this?” It’s a bit like Apple, when Apple send a new one, it’s pages and pages. My guess is nobody reads it, or if you say you don’t accept it, then you’re not going to do business with Apple, which is difficult. Is there a bit that says actually if they’re all reasonable and fair, why not just sign them and accept them?
Ryan Cracknel: The consumers, yes. You’re kind of right. There’s the unfair contract terms act, which dictates that certain terms can’t be unreasonable, particularly in relation to exclusions and liability. The likes of Apple, it is kind of a take it or leave it basis. You’re not going to approach Apple and say, “Oh, actually I have issue with clause 13B.” They’re not going to entertain it. It’s a take it or leave it approach, and if you want that service, you’re going to have to agree to it.
From a consumer perspective, you’re probably more covered, but you can’t necessarily rely on the fact that all the terms are going to be great. They’re not going to be in your favour at the end of the day. They’re going to be in favour of the service provider. For businesses, it’s a bit less regimented. Under English law, the courts, and parliament are quite happy for businesses to arrange and allocate risks between themselves, so you can agree pretty much any terms you’d like between yourselves.
There’s situations where unfair contract terms will apply in certain situations. There’s certain provisions in law which you can’t exclude. For example, you can’t exclude liability for death and personal injury. Liability caps generally have to be reasonable. Typically, it’s 100% of the fees is generally seen as reasonable, but obviously case law changes from time to time.
Essentially, businesses can agree any terms between themselves. They can be as unreasonable as they like in certain situations, and they’ll be plausible because the courts will say that, “Well, the parties have got, respective to their own businesses, they can have those discussions. If they decide to proceed, they’re doing so on the basis there and the knowledge of what they’re signing.” That’s what’s really important to know that, well, what terms am I signing up to?
Again, it’s worth having a third-party agreements view it because ultimately, if you’re using a supplier, the chances are their agreement is going to be completely in their favour.
Neil Foley: Is that something that we would use a lawyer like yourself for? If I had a terms of business from a supplier and actually because they’re often written in quite legalese terms that something that is pinged over to you and you can cast your eye over it and say, “Actually, clause three sounds, are you sure about this, that, the other?” Clarity.
Ryan Cracknel: Yeah. Obviously viewed thousands of contracts now over my years of practising and because of that, I’m able to spot the issues quite quickly. We’ve adapted ourselves as to provide a really easy way of clients being able to assess wat the legal risks are in a contract. It’s our, “Shall I sign?” Contract. Sorry, shall I sign service I should say, which basically we can adapt our level of input depending on what you need.
If you want a snapshot report, we can do that. We’ll just give you a bullet point list of key issues in the contract. If you want a full markup, we can do that. We can basically go through and highlight all of the risks, all of the things which aren’t necessarily in your favour. We can also amend the contract so it is more favourable to you.
We can have that discussion with you to see what the key issues are for you. We can also add comments into the document, so we can send it back to the other side and say, “This is the legal opinion we sought and these are our comments if you want to proceed.” We can also manage negotiations for clients as well. We have a huge amount of experience in negotiating contracts.
We just started a huge one with Walmart in the US. It’s a prolonged process and lots of long lights, but it’s really good when you get to the end result and the client’s really happy because they’ve got a reasonable commercial position at the end of it where they’re comfortable with the legal risk, particularly in somewhere like the US where you’re more likely to be sued.
Neil Foley: Yeah, absolutely. Again, this is something I see a lot in terms of invoices. I often see on invoices people have statements. The goods belong to me until the invoice is paid in full. How does that stand? Is that a simple, straightforward thing to do or not?
Ryan Cracknel: Especially retention of title point, so if you’ve got a clause in your agreement which says that risk in the goods passes on delivery and title passes on payment, that’s quite a standard position. Because you still own the goods, whilst payment hasn’t been received, worst case scenario obviously is you’re not paid for those goods. You’d have the right then to go on to the client’s premises to obtain those goods from them. Ultimately, it reduces your exposure because you’ve got something physical that you can hold onto.
You do need to reserve that right to do that in the agreement obviously. For consumers, it can be a bit more blurry as to what extent you can go on to consumers’ premises and obtain your goods back from them. For businesses, certainly you can say you have to keep the goods separate from your other products. You have to make them available to us-
Neil Foley: Would this be in the terms of business, so in the terms of business to start with and then you’re reinforcing it by putting it on your invoices?
Ryan Cracknel: You can have it in your terms of business. If something is in your invoice, ideally you should refer to the, incorporate your terms of business. You don’t need to restate the terms each time.
Neil Foley: If I didn’t have terms of business and I just put it on the invoice, does that work?
Ryan Cracknel: In terms of just having a retention of title clause in your invoice? Yes, potentially. The issue is obviously if you don’t have a full set of terms, it’s going to be a standalone clause. There’s going to be slight ambiguity as to what terms apply to that. What governing law is that deemed to be the entire agreement between parties, for example, if when you go from the invoice it said, “Oh, don’t worry about this clause. It’s not going to apply.” What would be enforceable then? Ideally, you should have it also be stated in terms and conditions of business to cover off those points as well.
Neil Foley: It’s been fascinating, Ryan. Are there any other points you wanted to raise or issues that you were thinking of that actually you’d love people to know, if there was one thing to take away, it would be this?
Ryan Cracknel: I think you just need to ensure that you’re comfortable with your terms and conditions, that you know what’s in them. You don’t want to be in a situation where you’re lying awake at night thinking, “What have I signed up to? Am I exposed? Is the business going to go under because I haven’t allocated my risk correctly?” From my experience, it’s very easy to get your terms and conditions up to scratch so they cover you effectively.
It’s not as expensive as most people perceive I think. There is a perception that going to see a solicitor is going to cost an arm and a leg. We’ve tried to adapt our services so it’s more accessible to do that, and we can work in partnership with you to ensure you get a good end result with all of your contracts.
Neil Foley: That makes sense. In terms of your history then, Ryan, I know where you’re trained, but tell us a little bit about your academic history and your legal experience.
Ryan Cracknel: I went down the traditional route solicitor route, seven years of training. I did my law degree at University of Kent. Got a first class, and then did … I stayed on there actually to do a master’s in international commercial law. Again got first, which is great. There was a long slog to get to that point. Then went to London to do my legal practise course with the College of Law, got distinction there. Did my two-year training contract, especially on the job solicitor training.
Then after that, I did work in-house with a couple of companies whilst I was doing my training and other firms of ours based on common arrangement and see the customer side of what they wanted. I’ve built that into my current practises. I also did my training, went to Mills & Reeve several years.
Basically, I saw a gap in the market to provide more cost effective and accessible means of finding legal services. There is not really too many businesses our in the market that do what I do, who just specialise in one area. Basically tried to create a niche commercial law practise.
I should mention as well, I’m currently classed as a non-practicing solicitor. Because I just practise non-contentious commercial law, it’s an unregulated sector. The plan is to convert my company into a law firm essentially by being regulated later this year. Basically, just to provide some reassurance to customers that actually it is on the same ground as all the other firms, but we have full professional indemnity insurance and everything else.
Neil Foley: That’s brilliant. Well, I appreciate you coming in, Ryan. It’s been really interesting and fascinating. Thanks, everybody for listening. If you want to know more, check out our website at the businessgrowthclub.net.
Remember of course that nothing here can be construed as being advice which ultimately depends on your individual circumstances
- On March 15, 2017