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Ignoring Contract Implications Spells Trouble

9th January, 2013

A recent case involving supermarket chain Somerfield (now part of the Co-Op) shows the wisdom of thinking through the implications of a contract before entering it.

The supermarket chain made an agreement with a company called ParkingEye to monitor cars parked in its car parks and deal with users who overstayed the permitted parking time.

ParkingEye installed automated systems for doing this and issued ‘penalty tickets’ for £75 to overstayers.

The complaints received by Somerfield led the company to cancel its agreement with ParkingEye, which then sued Somerfield for the profit it lost due to the termination of the contract.

In the view of the court, the tactics used by ParkingEye to extract payment of the penalty tickets, which included sending out a letter with a chequered edge threatening legal action if the fine was not paid, were much too aggressive.

Somerfield argued that ParkingEye had operated the contract unlawfully from the outset and had been dishonest in intent. This, Somerfield argued, rendered the contract unenforceable. ParkingEye argued that it had not appreciated that one of its letters was of dubious legality and that it would have changed it if it had known.

ParkingEye won. The fact that its tactics were aggressive and caused Somerfield problems with irate customers was not in itself sufficient to void the contract. ParkingEye was awarded £350,000.

This case shows how important it is to understand the implications of such agreements. In this instance, had Somerfield agreed the process for dealing with motorists who overstayed the allotted parking time and made that part of the contract, the adverse reaction from customers and the need for legal proceedings later could both have been avoided.

If you are negotiating a contract, we can assist you to avoid unexpected, unpleasant consequences. Contact Nick Clarke at [email protected] or on 01244 405558 for any advice on contracts.

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