Damages for breach of warranty are designed to put the claimant in the position it would have been in had the warranty been true, whereas damages for misrepresentation are designed to restore the claimant to the position it would have been in had the misrepresentation never been made.  In some cases, the same facts may support either a breach of warranty claim or a misrepresentation.  This issue is tricky since the measure of damages can be significantly different; monetary damages for breach of warranty. as opposed to rescission of an agreement for a misrepresentation

A warranty provision, generally precludes liability for representations since it would be incongruent to negotiate limitations on liabilities for warranties and remain liable without limitation for representations.  Moreover, in order to give rise to a misrepresentation claim, it is essential that a claimant be induced by the representation to enter into the contract.   This creates a timing problem because something that is contained in the contract (and therefore has no effect until the contract is signed) cannot be said to have caused a party to enter into the contract.

To be certain, warranty provisions should clear and unambiguous.  Add a stipulation that any misrepresentation claim based on a warranty is limited to an amount equal to the corresponding warranty claim.  And an express provision that the parties have not relied on any oral or written representation not contained in identified documentation and otherwise that waives any rights not conferred by the contract.

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In a recovering economy revenues might be on the rise, but profits are still the key to success.  Global structuring continues to hold its place as a one method of increasing profits.  U.S. tech companies implement the most aggressive global structuring position.  Tech companies, in particular, can easily operate across borders, locating the head office in low tax jurisdictions.  According to the Organization for Economic Cooperation and Development (OECD), 37 of the top 50 U.S. tech companies use a global structure that effectively realizes greater profits in countries with lower than average corporate tax rates.

Both low tax jurisdictions and no-tax jurisdictions can be considered tax havens.  Surprisingly, low tax jurisdictions often result in a lower combined corporate tax rate than, no-tax or zero tax jurisdictions.  The busiest tax havens currently are Ireland, Switzerland and the Netherlands.  I predict this will change, perhaps before the end of 2014, but more likely significant changes are at least five years out.  One reason for the change will be plans by the OECD to redefine the “permanent establishment” concept.  It is expected that any revision of the attribution of profits rules including permanent establishment will impact other areas of global structuring, including transfer pricing.

So will no-tax jurisdictions, the true “offshore” countries create competition for low tax jurisdictions?  The answer is “yes.”  Tax free jurisdictions will gain in popularity as low tax jurisdictions are forced to adopt the changes the OECD has in mind.  International companies will once again tweak their structures to reduce overall tax burdens.  Tax free jurisdictions tend to have a lower population and lower tax base.  These jurisdictions need to attract business to create jobs and boost their economy, which can be accomplished without imposing income tax liability.

Need assistance with your global structuring?  Contact me at wkcantab@cantab.net

Technology advancements have provided the means for businesses to grow their products, services and consumer base, both nationally and globally. Using electronic communications to form contracts, whether by website purchases or by e-mail correspondence, businesses must have confidence in the validity and enforceability of those contracts and whether they can be evidenced in court proceedings.  Much of the business’ confidence, or lack thereof, is derived from electronic and digital signatures. While the legislation in the U.S. is clear and tested in court, international legislation is untested or, depending on the country, doesn’t exist.

U.S. Legislation. In the U.S., there are two primary pieces of legislation that govern digitally-created contracts, namely: the E-Sign Act and the UETA, or the Uniform Electronic Transactions Act.  The E-Sign Act is a piece of Federal legislation that prevents electronically-created documents and contracts from being held out of evidence simply because they were created digitally or electronically. The UETA has served to provide a singular law amongst the States to prevent confusion in this area.  It has been adopted by 47 states, though the remaining three states do recognize electronic signatures.

Not only are UETA electronic signatures allowed and recognized by law, but have proven to be even stronger evidence in court than a written signature. In order to meet the guidelines set forth in UETA, most companies employ e-signature and electronic contracting software and the services of vendors. Choosing a specific e-signing vendor will depend on the type of business and the types of transactions.  Now that some of these products and services have been tested by the judicial system, determining which is best suited to a particular business or transaction can be complex and confusing.

Global Legislation. While most of the first-world nations have adopted legislation to deal with this matter, emerging markets may not have. Beyond that, the vast majority of legislation adopted globally has yet to be tested in court. This does create problems when commerce is reaching out to new places. Some countries with legislation include: Canada, Australia, New Zealand, the United Kingdom, the European Union and South Africa. These countries’ laws are extremely similar to the legislation in the U.S. but because of different nomenclature and being untested, there is some confidence to be built.

If your business uses electronic or digital signatures, would like to start or is looking for help in determining the efficacy in international transactions, please don’t hesitate to contact us in this matter.

The Foreign Account Tax Compliance Act (“FATCA”) is gaining momentum with Bermuda, Malta, the Netherlands, Jersey, Guernsey and Isle of Man signing bilateral agreements with the U.S.   The FATCA bilateral agreements target U.S. taxpayers with foreign accounts and allow for more comprehensive information reporting and imposes a 30% withholding tax on certain payments to accounts held by U.S. taxpayers.  FATCA was enacted as part of the HIRE Act, to ensure there is no gap in the ability of the U.S. government to determine the ownership of U.S. assets in foreign accounts.

With such momentum FATCA is gaining international support.  Offshore jurisdictions are facing a dilemma, since payments made from a U.S. financial institution to a foreign account will be subject to a withholding tax if the information on the U.S. account holder is not provided.  Foreign financial institutions may enter into FATCA agreements individually, if permitted by local government.  But once signed, will the FATCA cause a decrease in business for the these countries?  Isle of Man, for example, is addressing the need for increased awareness of its availability of skilled talent in the financial services sector, hoping to forestall any downturn should foreign companies relocate to avoid information reporting requirements.

Additionally, a conflict could arise between FATCA and local data protection laws, which limit the cross border transfer of personal information.  Consent is often required before a such a transfer can be made, foreign financial institutions will be put in the position of closing accounts where consent is not provided.  Foreign financial institutions will be required to obtain consent to the transfer from the U.S. account holder.  This conflict will continue to arise and its complexity increase.

Businesses are collecting and processing more and more personal information.  Given the broad definition of personal information, the collection and combination of demographic and behavioral data from multiple sources can result in the identification of individuals and therefore is regulated by data protection laws.  Companies use this information for many reasons, to build customer profiles, store repeated behavior, forecast future behavior, reduce fraud, and errors.  Data protection and privacy concerns arise whenever personal information is collected and stored or processed, even to create a broad base marketing behavioral analyses.

The ease of collection, storing and processing data creates tremendous opportunities for businesses.  For example, a customer makes an online purchase of boating equipment, the company will have collected not just personal identification, but now knows the customer is a boater and can use that information for future marketing.  Amazon collects a tremendous amount of information from its e-readers.  The information collected can determine the types of books the customer is reading, whether they scan the book, jump to the end or never finish it.  With this information Amazon thinks they can predict what you will read next and market appropriately.

The question is whether the company is properly informing the customer about how it will store and use the personal information.  Blanket permission for a use of personal information may not be sufficient any longer.  Some data protection laws require consent be obtained for each use and re-use of personal information.  This imposes a significant burden on the use of personal information for the purposes of producing useful data analytics particularly where the personal information is anonymous.  Nevertheless, personal information obtained from multiple sources can be used to identify an individual and is therefore regulated.

Consumer analytics are often used by various different companies and departments and therefore, when using consumer analytics, even so called “anonymous” data, sound training and education regarding date protection laws is essential.

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California lawmakers have been busy making changes to the State’s current online privacy regulations. The first changes will come into effect today whilst another change will be effective starting in 2015. The Legislature has changed California law to make privacy policies and information gathering more transparent, protect online children and minors’ information and advertising exposure and finally, to expand on online data security breaches.

Do Not Track Law. Commercial Internet websites and online operators, including mobile apps (collectively “commercial websites”) collecting information from California residents will have to comply with new regulations starting today when the California Assembly Bill 370 (“AB 370”) comes into force as an amendment to the Online Privacy Protection Act (“CalOPPA”).  California has unanimously approved the first “Do Not Track” law in the world. Prior to this amendment CalOPPA required commercial websites disclose to the consumers the categories of personal information to be gathered within its privacy policy and with whom this information might be shared.  AB 370 has been added to require commercial websites to fully describe how they respond to Do Not Track settings in web browers and whether third parties can access and collect their information across a network of sites. Though the new regulations will not require the websites to honor Do Not Track signals, there will be more transparency for the consumers.

Shielding Children. Protecting children and minors online has also been part of the agenda this year for the California Legislature. Senate Bill 568 will protect online minors from more adult advertising by requiring that websites directed towards children and minors do not advertise products and services that a person of their age would not be able to partake of. Additionally, these websites will be required to give children and minors who have registered with the website more content control, thus allowing them the ability to delete content they have posted more easily. This amends CalOPPA by seeking to protect all minors, rather than the under 13 that CalOPPA applies to currently.

 Data Security Breaches. Also coming into effect today, Senate Bill 46 which amends the California Data Breach Notification law, to extend the current breach notification requirements to compromised log-in details, usernames and email addresses. Starting today, if these details have been compromised, the company will have to provide notification to the effected Californian, advising them to make changes to protect themselves.

For assistance with assuring that your company’s website and online presence adopt and follow these new regulations please contact us.