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Vanity Nails & Phoenix Business Agents Limited **WON**


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hello,

we have been contacted by that company to sell our business. We only discovered their practices after signing with them. We called the agreement off the day after signing with them. Now they are asking us to pay their £3000 penalty even without carrying any work towards our business selling. Could you or advice us to someone to help us getting out of that situation ?

 

Thank you in advance.

 

Best regards

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HMMMMM........

 

According to companies house a small company, registered to a little terraced house, and their main clientele seems to be little asian run businesses like post offices and corner shops with a few hairdressers and cafes thrown in.....

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The way I see it, you have signed the contract as a private individual and therfore are entitled to protection by Consumer Protection regualtions.

 

There is no notice in this contract that meets the requirements of:

 

The Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regulations 1987

 

 

 

The contract as such is cancellable at any point upto seven days following the date that they serve your cancellation rights to you.

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Cancellation of Contract

 

4.—(1) No contract to which these Regulations apply shall be enforceable against the consumer unless the trader has delivered to the consumer notice in writing in accordance with paragraphs (3) and (4) below indicating the right of the consumer to cancel the contract within the period of 7 days mentioned in paragraph (5) below containing both the information set out in Part I of the Schedule to these Regulations and a Cancellation Form in the form set out in Part II of the Schedule and completed in accordance with the footnotes.

(2) Paragraph (1) above does not apply to a cancellable agreement within the meaning of the Consumer Credit Act 1974 or to an agreement which may be cancelled by the consumer in accordance with terms of the agreement conferring upon him similar rights as if the agreement were such a cancellable agreement.

(3) The information to be contained in the notice under paragraph (1) above shall be easily legible and if incorporated in the contract or other document shall be afforded no less prominence than that given to any other information in the document apart from the heading to the document and the names of the parties to the contract and any information inserted in handwriting.

(4) The notice shall be dated and delivered to the consumer–

(a)in the cases mentioned in regulation 3(1)(a), (b) and (d) above, at the time of the making of the contract; and

(b)in the case mentioned in regulation 3(1)© above, at the time of the making of the offer by the consumer.

(5) If within the period of 7 days following the making of the contract the consumer serves a notice in writing (a “notice of cancellation”) on the trader or any other person specified in a notice referred to in paragraph (1) above as a person to whom notice of cancellation may be given which, however expressed and whether or not conforming to the cancellation form set out in Part II of the Schedule to these Regulations, indicates the intention of the consumer to cancel the contract, the notice of cancellation shall operate to cancel the contract.

(6) Except as otherwise provided under these Regulations, a contract cancelled under paragraph (5) above shall be treated as if it had never been entered into by the consumer.

(7) Notwithstanding anything in section 7 of the Interpretation Act 1978(1), a notice of cancellation sent by post by a consumer shall be deemed to have been served at the time of posting, whether or not it is actually received.

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Recovery of money paid by consumer

 

5.—(1) Subject to regulation 7(2) below, on the cancellation of a contract under regulation 4 above, any sum paid by or on behalf of the consumer under or in contemplation of the contract shall become repayable.

(2) If under the terms of the cancelled contract the consumer or any person on his behalf is in possession of any goods, he shall have a lien on them for any sum repayable to him under paragraph (1) above.

(3) Where any security has been provided in relation to the cancelled contract, the security, so far as it is so provided, shall be treated as never having had effect and any property lodged with the trader solely for the purposes of the security as so provided shall be returned by him forthwith.

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Thank you for your information. But we've been told (by them) that because we were signing on behalf of our company, the agreement is a business to business one. Therefore, the consumer act regulation doesn't apply. Is that correct ?

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The contract is the same as the one posted in the first post and when this went to court the matter of signing as a private individual made no change to the fact that it is a business contract. I tried to use consumer protection and the judge dismissed this within the first 10 minutes of the hearing as the claimants solicitor provided case law to establish that the selling of a business is not covered by consumer regulations even if you sign as an individual. The judge stated that the £1000 paid upfront was the cost of administration and marketing as it says in your contract. He therefore said that the £3000 was a penalty and unenforcable in law as it was not a genuine pre estimate of loss. It cannot be the loss suffered as the £1000 is a payment for marketing - so what have they lost. In my view you will have lost the £1000 but the £3000 is a penalty and unrecoverable in law. If your £1000 had been a deposit they would be on stronger ground but it states that it is a marketing fee. I may be wrong on the loss of the £1000 but in the case at court that I attended the judge dismissed the counter claim for the £1000.

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Thank you for your information. But we've been told (by them) that because we were signing on behalf of our company, the agreement is a business to business one. Therefore, the consumer act regulation doesn't apply. Is that correct ?

 

The contract is the same as the one posted in the first post and when this went to court the matter of signing as a private individual made no change to the fact that it is a business contract. I tried to use consumer protection and the judge dismissed this within the first 10 minutes of the hearing as the claimants solicitor provided case law to establish that the selling of a business is not covered by consumer regulations even if you sign as an individual. The judge stated that the £1000 paid upfront was the cost of administration and marketing as it says in your contract. He therefore said that the £3000 was a penalty and unenforcable in law as it was not a genuine pre estimate of loss. It cannot be the loss suffered as the £1000 is a payment for marketing - so what have they lost. In my view you will have lost the £1000 but the £3000 is a penalty and unrecoverable in law. If your £1000 had been a deposit they would be on stronger ground but it states that it is a marketing fee. I may be wrong on the loss of the £1000 but in the case at court that I attended the judge dismissed the counter claim for the £1000.

 

Exactly - you cannot issue a claim to profit from a breach of contract, you can claim damages however and those damages must equate to losses. £3,000 is not a loss, it is a penalty clause added to force you to continue with using them to sell your business.

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You have been very helpful on our case, but we were wondering if there wasn't anything that we could do to take down those kind of business. Because obviously, we were not the first victims and we won't be the last.

 

We reported that company to the OFT already, but is this sufficient ?

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By OFT do you mean Trading Standards?

 

Their number is 08454 040506.

 

Whatever arguments testament refers to in the case he saw, what I think is dubious is whether the contract is personal or business.

 

"...if the company defaults.......then the said person signing this agreement........personally make good such default......"

 

If it's a business contract, then that is an unfair clause therefore contract is not valid. If it's a personal contract, there is no cancellation notice.

 

Either way, if there is ambiguity about the contract, then the weight should be in your favour....

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Just to clarify I actually attended the hearing with a business owner and spent time both in the hearing and outside the hearing in discussion with the claimants solicitors.

 

Phoenix have a contract with several solicitors who are contracted to represent the franchise owners.

 

The case we presented to the court relied on consumer guidance as produced by the OFT and the issue of an unenforceable penalty. The judge went through the matter in detail and made it clear that this transaction was a business contract as both parties were "a business" and that it related to the sale of a business and therefore parties were on an equal footing.

 

He stated that the contract was signed and agreed by the parties concerned and that my client had the chance to check the contract. We could not prove that verbal agreements invalidated the contract as it was one parties word against the other.

 

The Judge spent a long time going through the case law for Consumer Law and the sale of a Business as supplied by Pheonix.

 

I thought we had lost the case until the Judge went through the matter of "penalties" in contract, once again in great detail. It was on this point that the claimant and his solicitor were at a loss to defend their position and the Judge dismissed their claim but stated that our counter claim was also dismissed.

 

We lost the £1000 but I had seen their costs for the hearing which were over £1500. I doubt that they will attempt to take you to court if you advise them that you will defend any such action on the grounds of it being an unenforcable penalty. In the event that you are taken to court I will supply you with the defence used in this recent case with personal info removed and amended to take account of the Judges position on consumer contracts.

Edited by testament1uk
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Unfair Contract Terms Act 1977 (UCTA)

 

You don't have the same protection as individual consumers when you make purchases exclusively for the use of your business. A consumer contract excluding liability for defective goods would be automatically invalid. But when buying as a business it's up to you to check in advance what terms and conditions you're agreeing to.

 

Sole traders count as businesses rather than consumers for any purchases they make in connection with their business activities. However, if the trader offers you credit terms up to £25,000, you receive the same protection as individuals under the Consumer Credit Act 1974 for this element of the contract.

 

The test of reasonableness

 

 

The UCTA doesn't define precisely what is meant by 'reasonable', but courts will usually take into account:

  • the information available to both parties when the contract was drawn up
  • whether the contract was negotiated or in standard form
  • whether the buyer had the bargaining power to negotiate better terms

You don't have the same protection as individual consumers when you make purchases exclusively for the use of your business.

 

"You could try to issue a claim against Pheonix for the £1000 in the small claims court - you might get a sympathetic Judge - but you will need to PROVE that the contract was unreasonable"

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We would like to thank you all for your messages and your advice.

 

We've been contacted by Phoenix Business Agents today, and they agreed to cancel our invoice and our agreement as a goodwill gesture. But they won't refund our advanced payment.

 

We would like to thank Phoenix Business Agents for that gesture and we appreciate their effort towards us.

 

We also would like to retract from any comments that we made earlier and close the topic.

 

Thank you all.

 

Best regards

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