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Christmas Kick-off: FIFA World Cup May Bring Tidings Of Joy For Retailers And Suppliers – Contracts and Commercial Law

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The FIFA World Cup is kicking off in Qatar on 20 November with
the final being set for just a week before Christmas. The World Cup
historically takes place during the summer, however, due to heat
concerns in the host country, has been rescheduled for the cooler
winter on this occasion. Such unique timing, overlapping both Black
Friday and Cyber Monday in the run-up to Christmas, may well bring
tidings of joy for retail businesses in the U.K., with Qatar,
calculated by Bloomberg to make $20 billion off the event, not
being the only giftee this holiday season.

It’s beginning to look a lot like Christmas

Both Currys, British electrical retailer, and John Lewis,
British department store chain, have revealed that they’re
anticipating surges in TV sales in the coming months, as well as in
other areas of technology such as projectors and sound systems,
with the two biggest drivers of TV sales (Christmas and the World
Cup) culminating in an England match on Black Friday.

Big sales are also expected in groceries, with both celebrations
of Christmas and football focusing largely on food and drink.
Waitrose, British supermarket chain, confirms that their Christmas
food lines are designed with both festive and football audiences in
mind, and has brought festive food and drink sales forward (the
chain revealed their Christmas range in August) to manage increased
sales.

Retailers and suppliers should be preparing for demand,
therefore, ensuring supply contracts are negotiated, agreed and in
place as soon as possible, as well as reviewing any already in
place.

Indemnity clauses

A contentious part of most supply contract negotiations?is the
indemnity clause.

An indemnity is a promise by one party (the indemnifying
party
) to reimburse the other party (the indemnified
party
) for its financial losses if a trigger event occurs. The
promise is made when the parties agree that it would be unfair for
the indemnified party to bear the resulting losses.

Indemnity clauses should be tailored to the specific supply
contract, and both parties should consider the following when
drafting:

The event that triggers payment must be clear. This is usually
an event over which the paying party has control, so that it is
fair for the liability to sit with them. The indemnifying party may
want to negotiate excluding events outside of their control, or for
which they are not to blame. For example, an act of God, or a loss
caused by the other party’s negligence.

The loss needs to be quantifiable. A well-negotiated indemnity
should balance both parties’ interests. For example, the
indemnifying party may want the loss to be covered by their
insurance, and the indemnified party may want to cover a specific
loss in full. Sometimes, the amount to be paid cannot be known
until the indemnified party’s liability is assessed in court
(e.g., where the indemnity uses the word ‘claims’,
‘damages’ or ‘judgment’.

Often, the indemnifying party’s duty is to pay for loss
directly and solely caused by the trigger. A wider or
narrower casual link may be negotiated, however. For example,
“in connection with”, may be interpreted as the
widest causal link between trigger and loss. The contract may also
state that the loss has to be ‘foreseeable’.

If the indemnity relates to reimbursement of damages (e.g., for
breach of contract) the protected party usually has a duty to
mitigate their losses. However, indemnities can be drafted to avoid
this duty to mitigate.

The indemnified party must prove what payment is due under the
contract. This normally involves providing the fact and amount of
the loss specified in the indemnity. Express wording can be
negotiated, however, to depart from this. For example, the parties
may negotiate that the indemnified party’s statement of the
amount due will bind both parties.

  • Exclusion of other claims

A party might indemnify another against loss arising from the
indemnifying party’s breach of contract. The indemnifying party
may also be liable to pay damages for that breach of contract. The
contract should state whether the indemnified party may pursue only
one claim, or both claims in the alternative, although there will
be no double recovery.

The parties to a contract may agree a ‘limitation of
liability’ clause which limits their maximum potential
liability to the other party. The parties need to decide whether
the indemnity is included under this cap or not. It is common for
liability under indemnities to be uncapped.

Because indemnities are very onerous clauses, they are
‘strictly interpreted’ by the courts. This means that there
is less leeway if the indemnity is poorly worded, and it is
important to get it right.

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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