Ireland: Commercial – An Overview Of 2013

We hope that 2013 was a good year for you and your firm and that 2014 brings new opportunities and further success. We saw a number of developments in the Irish market last year and you can watch a short video from IDA Ireland with local highlights here, including updates on a number of our clients.

We have prepared a short overview of key developments in the Commercial environment during 2013. We hope this proves helpful and if you require any additional information on these topics do please contact one of our team.

1. European Commission Calls on the US to Restore Trust in EU-US Data Flows

A recent communication published by the European Commission set out the actions that the Commission asserts need to be taken to restore trust in the flow of data between the EU and the US. This came as a response to the allegations by former US National Security Agency ("NSA") contractor Edward Snowden that the NSA was spying on overseas internet traffic via its PRISM programme, as well as apparently eavesdropping on the mobile phones of political leaders.

The Commission called for action in six areas:

  • a swift adoption of the EU's data protection reform, the General Data Protection Regulation;
  • augmenting the Safe Harbour Scheme - the Commission made 13 recommendations to improve the functioning of the Scheme;
  • strengthening data protection safeguards in the law enforcement area;
  • using existing Mutual Legal Assistance Treaties and sectoral agreements to obtain data;
  • addressing European concerns in the ongoing US reform process (review of US national security authorities' activities); and
  • promoting privacy standards internationally.

The Commission, along with the US authorities, is seeking to identify remedies to the data flow concerns by summer 2014 and to implement them as soon as possible. The Commission will also review whether the concerns relating to the functioning of the Safe Harbour Scheme have been dealt with adequately.

2. Consumer Rights Directive

The Consumer Rights Directive (2011/83/EC) (the "Directive") was transposed into Irish law in December 2013, by virtue of the European Union (Consumer Information, Cancellation and Other Rights) Regulations 2013 (SI No. 484 of 2013) ("2013 Regulations"). The 2013 Regulations will come into operation on 13 June 2014 and will apply to contracts concluded after that date.

The Directive consolidates and simplifies the currently distinct laws for distance contracts (such as contracts concluded online, over the telephone, or by post), off-premises contracts (contracts concluded away from the trader's premises, such as in the consumer's home or workplace) and other types of consumer contracts. It aims to increase consumer confidence and to facilitate cross-border shopping, in particular over the internet. In addition, it is intended that the Directive will decrease the costs for businesses offering goods and services to consumers in other EU Member States, by ensuring a level playing field and increasing legal certainty with respect to these types of transactions.

Once in operation, the 2013 Regulations will revoke the current European Communities (Cancellation of Contracts Negotiated Away from Business Premises) Regulations 1989 (SI No. 224 of 1989) and the European Communities (Protection of Consumers in Respect of Contracts Made by Means of Distance Communications) Regulations 2001 (SI No. 207 of 2001).

The 10 most important changes for consumers in the new Directive, as described by the European Commission, are:

  • the elimination of hidden charges and costs on the Internet;
  • increased price transparency;
  • banning pre-ticked boxes on websites;
  • a 14-day cooling off period, extended from 7 days;
  • improved refund rights;
  • introduction of an EU-wide model withdrawal form;
  • elimination of excessive surcharges for the use of credit cards and hotlines;
  • clearer information on who bears the cost of returning goods;
  • better consumer protection in relation to digital products; and
  • common rules for businesses making it easier to trade across Europe.

The Directive is aimed at achieving a business-to-consumer internal market, striking the right balance between a high level of consumer protection and the competitiveness of enterprises.

While the codification of law is helpful, a number of the measures will require businesses to review their practices to ensure compliance. In particular, the elimination of excessive credit card surcharges and the extension from 7 to 14 days for the return of goods are likely to have a material impact on businesses that trade online.

3. Slattery v Friends First Life Assurance Company Ltd

Arguably the most important Irish contract law case of 2013 is Slattery v Friends First Life Assurance Company Ltd. This judgment serves as a reminder to maintain caution throughout commercial transactions and, in particular, to remain alert to potential amendments or additions to the terms of contracts.

While the High Court also awarded damages against the Defendant for breach of confidentiality, one of the more interesting issues was the Court's approach to interpreting the commercial documents before it.

These proceedings arose out of an unsuccessful business venture, namely, the purchase of the St. Regis Hotel in Washington DC. The Plaintiff's private equity firm, Claret Capital, and the Defendant were part of a consortium involved in the purchase of the hotel for a total cost of $173.25m. To secure the deal, the Defendant agreed to advance loans to two Claret Capital related companies, over which the Plaintiff provided a personal guarantee.

The Court granted rectification of the transactional documents on grounds of a unilateral mistake by removing a clause that sought to limit the Plaintiff's liability on foot of the personal guarantee. The Defendant was unaware that one of the transaction documents contained a clause, which had been added in a late draft and not flagged in the mark-ups exchanged between the parties which purported to mitigate the effect of the personal guarantee. In reaching its conclusion, the Court relied on the principle that one has to look at the common intention of the parties as to the nature of the contract before the mistake arose. This essentially led to the Court re-interpreting an agreement, drafted by commercial lawyers, in order to rectify an attempt by the Plaintiff to mitigate the effect of the personal guarantee.

Given that the High Court was prepared to look behind this heavily negotiated commercial contract to ascertain the true intention of the parties, there is a risk that this approach might undermine the enforceability of contracts as they are written, resulting in potential legal uncertainty.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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