Case Study: How to deal with breaches of commercial agreements
Breaches of commercial agreements are not unusual. Whatever sector you operate in or type of business you run, you will enter into contracts of one sort or another, but what should you do if the other party breaches any term in an agreement?
In this case study, Disputes Partner Karen Elder highlights some problems encountered by a client and the steps taken to address the breaches. The big lesson to learn is the importance of acting quickly.
The problem: An entrepreneur buys a business and retains the previous owner as an employee to utilise his specialist skills and knowledge. However, the employee uses his position to begin setting up in competition.
The solution: Our client was a business entrepreneur who we successfully advised in relation to a variety of breaches of the terms of a Share Purchase Agreement and an Employment Contract both of which had far reaching implications for his business.
Our client had purchased a software company, agreeing to retain the individual selling the business as an employee.
However, things began to go wrong when the prior owner started setting up in direct competition to our client’s business within the prohibition period, offering identical services and seeking out our client’s customers, using confidential information and breaching both the intellectual property and information technology warranties.
These breaches were serious. We were instructed on an urgent basis to investigate and formulate an extremely robust pre-action protocol letter of claim, threatening to injunct the individual unless onerous undertakings were entered into and documentation delivered up to our client.
The outcome: The letter had the desired effect and within less than 48 hours, the undertakings had been signed, the documentation returned to our client and all costs incurred by our client were successfully recovered.
Value to client: This is an excellent example of the importance of taking swift action to address breaches of commercial agreements. Doing so can halt the damage being inflicted on a business and ensure things are rectified expeditiously.