Beware Large Corporates – They may change their minds!

In a case reported yesterday, the High Court has supported a major corporate in its claim against a smaller collaborator to repay $2 million because one of its employees had made a mistake in agreeing a collaboration milestone had been met when it hadn’t .

This case highlights several issues faced in negotiating agreements. First even though the agreement was 67 pages long with detailed schedules the parties had a long argument in the court over whether it could come to an end, and if so when, and what did that mean. The principal issue in or view however related to the management of the contract in other words once signed some agreements need to be working documents and used on a day to day basis to try and ensure that you don’t get caught out like the smaller company in this case. It is common feature of all collaboration contracts where IP is being created and, in a completely different field, construction contracts where the industry is notoriously litigious and adversarial.

Another case has also suggested that you can’t always rely on a clause requiring the parties to act fairly and reasonably, which is essential behaviour in any longer term agreements so as above you need to ensure that the drafting reflects the commercial reality in a way the courts will accept and then manage this behaviour on a day by day basis.

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