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UK-Justice, Barrister
Category: Law
Satisfied Customers: 16193
Experience:  Called to the Bar in 2007
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My business has 1 product (bike saddle). We made an exclusive

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My business has 1 product (bike saddle). We made an exclusive agreement with another company to make, market and sell (globally) and report quarterly on performance and pay a per saddle license fee. They have sold less than we did in the previous year despite a distributor in Germany with a contract for minimum sales. They broke the quarterly report clause at least. They have disagreed with our termination notice via a solicitor. What should we do?
Thanks for your question, I will do whatever I can to help you. Please remember to rate my answer SMILEY FACE OR ABOVE.

What does the contract say about termination?

Under what law is the agreement governed by?
Customer: replied 5 years ago.


The agreement's relevant clauses are below:


This agreement and any dispute or claim arising out of or in connection with it or its
subject matter or formation (including non-contractual disputes or claims) shall be
governed by and construed in accordance with the law of England.



14.1 This agreement shall come into force on the Effective Date and, unless terminated
earlier in accordance with clause 14.2, 14.2 or 14.3, shall remain in force until the
date on which the last Intellectual Property Right in the Licensed Product(s) expires.
14.2 The Licensee shall have the right to terminate this agreement on giving the Licensor
not less than 6 months' written notice of termination.
14.3 Either party may terminate this agreement immediately by giving written notice to the
other if any of the following circumstances arises:
(a) the other party commits a material breach of any term of this agreement and
(if such breach is remediable) fails to remedy that breach within 14 days of
being notified in writing to do so;
(b) the other party suspends, or threatens to suspend, payment of its debts or is
unable to pay its debts as they fall due or admits inability to pay its debts or
is deemed unable to pay its debts within the meaning of section 123 of the
Insolvency Act 1986;
(c) the other party commences negotiations with all or any class of its creditors
with a view to rescheduling any of its debts, or makes a proposal for, or
enters into, any compromise or arrangement with its creditors;
(d) a petition is filed, a notice is given, a resolution is passed, or an order is
made, for or in connection with the winding-up of the other party;
(e) an application is made to court, or an order is made, for the appointment of
an administrator, or if a notice of intention to appoint an administrator is
given, or if an administrator is appointed over the other party;
(f) a floating charge holder over the assets of the other party has become
entitled to appoint, or has appointed, an administrative receiver;
(g) a person becomes entitled to appoint a receiver over the assets of the other
party, or a receiver is appointed over the assets of the other party;
(h) a creditor or encumbrancer of the other party attaches or takes possession of,
or a distress, execution, sequestration or other such process is levied or
enforced on or sued against, the whole or any part of its assets, and such
attachment or process is not discharged within 14 days;
(i) any event occurs, or proceeding is taken, with respect to the other party in
any jurisdiction to which it is subject that has an effect equivalent or similar
to any of the events mentioned in clause b to clause h (inclusive);
(j) the other party suspends or ceases, or threatens to suspend or cease, to carry
on all or a substantial part of its business; or
(k) there is a change of control of the other party.
15.1 The expiry or termination of this agreement for any reason shall not affect any
provision of this agreement which is expressed to survive or operate in the event of
expiry or termination and shall be without prejudice to any rights of either party
which may have accrued by, at or up to, the date of such expiry or termination."

On what basis have they disagreed with termination?
Customer: replied 5 years ago.

The main claim that the termination is invalid seems to be "no grounds for immediate termination" and "alleged breach of its reporting obligations" that we should allow 14 days to remedy.
How they remedy not reporting each quarter (within 10 days of the 1st of that quarter) when only 1 report was received in more than a year (April 1 - delivered late: May 23rd.)
Also due to "minuscule sales volume" (their problem as responsible for marketing, sales and manufacture) then "a breach of clause 9.6 could never qualify as material".
We are MDL, they are USL. The solicitor's letter is below <commented> by our MD.




The written agreement between Manta Design Limited ("MDL") and USL dated 28 August 2011 ("the Agreement"), establishes the following contractual and proprietary rights relating to the bicycle saddle design that is the subject of the Agreement:

• USL is the exclusive licensee of certain intellectual property rights belonging to MDL

• USL is the exclusive owner of certain tooling <"hereby transfers the title and risk in the Existing Tooling

to the Licensee" which they are no longer*>

• USL is the exclusive owner of certain stock comprising parts and finished items <trickier, they effectively took a 20k discount, while threatening to throw our stock in the skip>

If you read the Agreement carefully you will see that it contains no minimum (or indeed any) performance obligations that must be satisfied by USL in order for the Agreement to remain in force. Nor does the Agreement contain any provision entitling MDL to terminate the Agreement for convenience. Finally, the consequences of termination provisions in the Agreement do not include any obligation on USL to transfer any property from USL to MDL.

The document headed "Agreement Termination Notice" that was delivered by MDL to USL before Christmas discloses no grounds for immediate termination <see 9.6/14.3>. As a notice of termination, therefore, it is a nullity and it is rejected. The Agreement remains in full force and effect.


The remainder of the terms in your letter and email, including the automatic transfer of tooling and stock, the purported grant of temporary licences and the proposal to charge handling fees are likewise rejected. There are no contractual or legal bases for any of them.

If MDL wishes to rely on USL's alleged breach of its reporting obligations in clause 9.6, then its only recourse is to issue a notice pursuant to clause 14.3(a) of the Agreement, identifying the alleged breach and requiring it to be remedied. USL would then have 14 days in which to remedy the alleged breach before termination could be effected.

We have advised USL that, given the current minuscule sales volume and the inability of MDL to demonstrate any resultant loss, a breach of clause 9.6 could never qualify as material <why not?> and, therefore, the termination mechanism set out in clause 14.3(a) would not be available to MDL. <I don't think that explains anything, at all>

However, no further debate about USL's compliance with clause 9.6 is necessary <I disagree> because, on 3 January 2013, USL sent to MDL an up to date report setting out details of all sales and Licence Fees.


We have <who has!> discussed the future commercial potential of the Manta saddle <there's more than one> with USL and have concluded that there is none. Consequently, USL is prepared to relinquish its rights under the Agreement, whether by invoking its right to terminate for convenience pursuant to clause 14.2 or by agreement with MDL, subject to the following:

<this pronouncement is utterly astonishing to me, no sense that applied marketing, such as you may find in the contract under, say, "Responsibilities" may sell some product (naturally deserving customer support), and a suggestion their lack of need to, inconveniently, uphold any clause they don't feel like, is caused by a product, defamatory and arse about face>


• MDL shall fulfil its contractual obligation, under clause 16 of the Agreement, to reimburse USL for MDL's contribution to the external professional fees incurred by USL to draft the Agreement. The relevant sum is approximately £1,000.

• MDL shall purchase from USL all the relevant tooling, all of the approximately 200 completed saddles and all remaining components in USL's possession.

USL is prepared to accept a payment of £6,000 in full and final settlement for the above transaction. <here I expected a more ridiculous figure, it makes me think they probably know they are on a weak footing*, when it comes to it> The purchased stock, tooling and components (a total of four pallets) can be collected from USL's premises by prior arrangement at any time during normal office hours in the two week period beginning on the day after USL's receipt of the £6,000 in cleared funds. If the pallets are not collected within the two week period, USL will levy a pallet storage fee of £5 per pallet per day.

The above offer shall remain open for a period of 28 days from the date of MDL's receipt of this letter. If MDL is unwilling to accept USL's offer, USL's only option will be to sell its stocks of saddles to the highest bidder and to sell the tooling and remaining components for their scrap value. USL will then issue proceedings against MDL for payment of MDL's contribution to the legal fees.

It is evident from your correspondence to date that you have not taken any competent legal advice on the effect of the Agreement, on USL’s performance obligations, on your approach to USL's alleged breach or on MDL's rights and obligations in relation to termination of the Agreement. <OK, I'm no lawyer, but still pure cheek, and what about the facts>



At this stage you dont need to do anything.

If they have breached it and failed to remedy and you have given notice, that is all you need do.

If they want to pursue this they will have to issue proceedings.

I think based on what you have said, there is enough for termination here.

So do not be bullied - the ball is in their Court. You do not need to do anything.

Once it comes to the end of the termination then just complete the contract.

But if they want to pursue it they will have to take further action.

Do not be bullied into making any admissions.

You have nothing to worry about.

I hope this helps.

Please remember to click *** OK SERVICE *** or above so that I am credited for my time. The question does not close and you can ask follow ups.

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Customer: replied 5 years ago.

We have some termination "demands", should we pursue them?

Mainly return of the tooling (not paid for by USL - worth £40K):...

must be returned to Protomould in original condition, and kept in safe keeping in the interim, from 2012-12-12, or paid for in full".


Termination doc. below.


Thanks again,


12th December 2012

Agreement Termination Notice

We hereby give notice that on 2012-12-12 the agreement, and therefore licence, granted by MDL (Manta Design ltd) on 2011-08-28 to market, produce or sell the licensed product is formally revoked, as of this date (please refer to: Manta Design Limited – Unified Sport Limited Agreement Review Meeting Minutes).

In summary, the grounds for revocation are significant failures to meet reasonable performance expectations, to fulfil the terms of the licence agreement (for example clause 9.6, ref: 14.3(a)), and to respect IPR owned by MDL.
Non-compliance with clause 9.6, in particular, is unresolvable. Further, some of these failures directly threaten the reputation of the product and of MDL and so on those grounds alone can no longer be tolerated.

As of 2012-12-12 USL (Unified Sport ltd) have no right to the current licence, and are no longer The Licensee. Therefore, the tooling, to which USL held title to under the terms of the agreement, must be returned to Protomould in original condition, and kept in safe keeping in the interim, from 2012-12-12, or paid for in full if USL wish to request a licence to produce MDL’s design(s). A delay in acknowledgment of this termination notice, or in compliance with its terms will incur an invoice for the full cost of the tools. USL must also request a licence from MDL, if it wishes to produce, promote, or sell any MDL design(s) beyond the pro tem license (see Interim Sales).

Any further actions by USL that we consider detrimental to MDL, our brand, or ourselves personally, including any non-compliance in procedures effecting MDL's business process and product, or regarding any material MDL has produced, or discussed, may be considered as grounds for legal action.


It must be understood that any failure to comply would constitute an attempt to obstruct MDL from going about their business. Acknowledgment of compliance is expected within 14 days of this document being sent.

Termination of the license, and hence expiration of the title on the tooling, is entirely due to USL's non-performance, disregard and transgression of clauses of the agreement, resulting in a very real risk of damage to the MDL brand and reputation.

Henceforth, USL are not entitled to use the tooling, sell stock, or advertise as the design's executive, without a valid agreement to do so (see Interim Sales).

USL were given unrestricted access for product trials prior to any agreement, free reign to test the design and research appropriate marketing.
Not having invested years of development time (including substantial market research and redevelopment) or finance manufacturing costs, the sole contractual requisite responsibility for USL is marketing and promotion (clause 6.2). However, contractual clauses were disregarded almost immediately and no appropriate marketing was implemented. USL failed to uphold the contract, hence the outstanding cost of the contract will not be met by MSL and any future agreement will involve a fresh license fee per saddle sold (see Interim Sales).

If we are additionally obliged to eliminate hindrance, inappropriate expenditures, and damage to our business, we will also instruct our accountants to identify where goods and services are, that were purchased with MDL monies during the period when all parties were working within MDL.

Any new license granted will enforce sustainability of our brand and compliance of agreements and the fee per saddle will reflect MDL’s resumed marketing work, and that MDL are free to market their designs as they find appropriate.

Interim Sales

Given that the original license is revoked, USL may continue to sell existing stock for 1 month from 2012-12-12 based on the following pro tem offer, or until a new, monthly license is signed.
An interim license fee, temporary or renewable on request, will be charged, payable to MDL on a monthly basis, of GBP10.00 on any saddle sold through any outlet other than our own.
This does not include a license to use, or title to the tooling.

If we receive no acknowledgment, communication or acceptance of this pro tem offer, or a request for a valid license regarding existing, or new, stock sales, we will regard it as sold and issue an invoice for fees accordingly, based on the figures we have in the report.

MDL sales from USL stock, will incur a payment of GBP50.00 payable to USL. The Amazon site must be withdrawn and the customer with the review based on “zero support" resolved.
Unauthorised (test, demonstration) video material on the website will be corrected immediately, along with other resolutions to problems we may prescribe; we will consider a license for other materials used. If the interim agreement, provided on request, is accepted in writing, details of all sales, however made, must be notified to MDL monthly, and MDL is to be notified at all times of new sales leads, promotional material, contact relating to the design(s), or anything pertaining to the design(s).


Under the terms of the agreement - it should be returned.

If they refuse then you can get an order from the County Court for 'delivery up - that is the Court will order that they deliver it.

If they refuse then the Directors can be sent to prison for contempt.

I hope this clarifies.

Please remember to click *** OK SERVICE *** or above so that I am credited for my time. The question does not close and you can ask follow ups.

Important: If you feel the need to rate as one of the lower two scores, it counts as negative feedback so please reply to me via the REPLY with any further questions you may have. I will be happy to assist you further.
I'm just following up with you to see how everything is going. Did my answer help?

Customer: replied 5 years ago.

Thanks for the follow up. We got a strange letter back from their solicitors:


Dear Sirs

Unified Sport Limited

We refer to your letter dated 23 January 2013.

In our letter of 11 January 2013 we said that it was evident that you had not taken any competent legal advice before issuing your termination notice or the subsequent email. We asked you to obtain professional legal advice before sending any substantive response. It is obvious that you did not.

USL's offer to sell the tooling and the stock to MDL for £6,000 remains open for acceptance.

Please do not write to us again <why not?> until you have obtained legal advice on the effect of the agreement, unless the purpose of your correspondence is either to accept USL's offer or to make an offer on behalf of Manta Design to purchase the tooling and the stock.

Yours faithfully"

Signed Taylor Vinters, no actual name?!

I think we investigate getting a County Court Judgment to "deliver up" but how?


You need to complete form n1 for delivery up...