The Term
of the Agreement was for an initial period of five years commencing 16 July
1997 but was automatically renewed for a further term of two years as notice to
terminate was not served or received by either party between the period 16
January 2002 – 16 March 2002. The next
period available to serve notice to terminate the Agreement will be 16 January
2004 – 16 March 2004. If notice to
terminate is not served or received during this period, the Agreement will
automatically renew itself for a further two years.
There
are however, two mechanisms in the Agreement which may provide an opportunity
to terminate the Agreement. The first exists under clause 12.2 and requires
either party to have committed a material breach or defaulted on one or more of
the terms of the Agreement. A material
breach usually results in consequences that are incapable of being rectified by
the offending party, however clause 12.2 provides the offending party with an
opportunity to rectify the breach before any termination of the Agreement is
permitted. To date, we are not aware of
any possible material breach of the Agreement by MBNA which would permit the
Council to terminate the Agreement without penalty.
The
second mechanism which may allow the Agreement to be terminated exists in
clause 12.3. To rely upon this
mechanism either party must be able to demonstrate that the other committed an
act of a criminal, immoral, indecent or materially prejudicial nature. If such an act can be demonstrated to have
been committed, then the non offending other party may terminate the Agreement
immediately. Aside from acts of a
criminal nature, an act that is immoral, indecent or materially prejudicial is
difficult to define as each of these terms are designed to be wide ranging in
their effect. Accordingly, any act
which may constitute one that falls into any of the above categories will have
to be judged on its own merits before a decision in this regard can be
made. To date, we are not aware of any
act which may be classified as criminal, immoral, indecent or materially
prejudicial to the Council and which would thereby permit it to terminate the
Agreement without penalty.
It
must also be noted that clause 12.3 must be read in conjunction with clause
12.1 which requires the parties to meet at least once with a view to reaching a
mutually agreeable resolution of any dispute or disagreement between the
parties pursuant to the Agreement.
Accordingly, prior to terminating the Agreement pursuant to a breach of
clause 12.3, the Council may first have to satisfy the requirements of clause
12.1
In
summary therefore, unless there has occurred any act which constitutes a
material breach of the Agreement or an act described above, the Isle of Wight
Council will be required to continue to adhere to the terms of the Agreement
until at least 16 July 2004 and no further provided of course that it serves
notice of termination at any time between 16 January 2004 and 16 March 2004.
1. Proceed with further promotion campaigns based on the
present formats until such time as the present contract ends.
Given
the criticisms received by the Council in respect of the distribution of
promotional materials we do not believe this to be an appropriate option to
pursue.
2. Seek changes to the current promotional arrangements for the
remainder of the current contract
This
is one option which should be explored.
In particular, we note that under clause 3.2 the Council has the right
of prior approval of all Programme advertising and solicitation materials to be
used by MBNA. We recommend that on the
basis of this clause, the Council seek written amendment to the Agreement to
avoid the problems concerning the distribution of promotional material.
3. Not to enter any further arrangement at the end of the
current contract.
This
is a decision which Council will need to make prior to the next notice of
termination period (16 January 2004 – 16 March 2004).
4. To negotiate a new contract for the commencement at the end
of the existing arrangements.
MBNA
will be reluctant to negotiate a new contract which amends those terms in their
favour in the Agreement and given that there is approximately 18months to run
on the existing Agreement, this may be a futile exercise as it may take as much
time to negotiate a new Agreement and once concluded, MBNA will most likely
request an extension of the present term.
5. To negotiate an immediate end to the current arrangement and
not enter into any further arrangements.
Finally,
it should be noted that as a measure of first resort, the Council should write
to MBNA noting that despite the recent expiry of the period for termination of
the Agreement under clause 11.2, the Council is desirous of terminating the
Agreement and requests that MBNA agree to formally termination effective from
three months of the date of the notice.
If this is rejected, then one or more of the above 5 options should be
considered.