Peter Vogel v. Fairlight: The Importance of a Written Agreement

A written agreement is an important part of a contract and guarantees the rights of the parties in case of a breakdown in the business relationship. A recent case, which pitted Peter Vogel Instruments Ltd against Fairlight. Au Pty Ltd was involved in an agreement where Fairlight was to develop software for PV and provide PV with its trademark for its products. PV developed two apps and asked Fairlight for consent to use its trademark. Fairlight did not respond. When the relationship broke down, each party sued the other for breach of contract.

What Role Does a Written Agreement Play?

As long as there is no problem in a business relationship, a written agreement remains under lock and key. However, in the case of a relationship breakdown, parties to the contract go back to the agreement to determine their rights. A written agreement minimises the challenges that come with business relationship breakdowns and determines what roles are not fulfilled.

The Interpretation

The court determines the rights of the parties to the contract. The court usually takes a business approach by looking at the purpose for which the agreement was made, what language and tone are used, and the circumstances that surround the agreement.

Risks of Terminating the Relationship

In the case mentioned above, Fairlight claimed that the agreement was validly terminated since there was a clause that allowed it to withdraw the license of the trademark if PV used it in a way that was deemed to damage the image of the brand. However, the court ruled that the agreement could go on after the termination of the license. After terminating the contract, Fairlight refused to supply the contracted goods. The agreement was repudiated making Fairlight liable for damages that refusing to supply may have caused to PV.

An Agreement to Agree

Ultimately, PV won the claim brought against them by Fairlight for copyright infringement. According to Clause 20 in the agreement, the software was supposed to be transferred after the final payment was made. However, the items to be transferred were to be defined in another document. Since no separate document was created, it was assumed that the transfer took place upon payment.

Working Out of the Scope of Agreement

It is risky to conduct business out of the scope of an agreement. Fairlight had complained that PV used Fairlight’s trademark on the two apps, which was not in the agreement. The court upheld the argument. It was inconsequential to say that Fairlight did not respond. Failure to respond is not the same as consenting to an action. Before taking any significant steps that involve another business, legal advice is vital to assess any risk involved.

WHAT SHOULD I DO NEXT?

Contact us if you would like to have more information on managing the legal risks involved in writing up contracts. Our lawyers at You Legal will be happy to assist you in whatever way we can.

* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.