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The many hues of legal jargon

12 March 2019 #Commercial #Corporate


We’ve been asked on several occasions in recent times by GP surgeries to give advice about having “green socks clauses” put into their partnership agreements. Such a clause  allows the partners to expel one of their number from the partnership without any reason (or even because their fashion sense is questionable), and can be useful where a partner simply does not fit, even though they are not strictly at fault in any way.

This set me wondering what other colours feature in legal jargon and the answer is that quite a few have made their way into it. Here is a selection:- 

  • The blue pencil test. This comes to us from contract law and relates to the doctrine of severance. In certain, limited circumstances, where part of a contractual provision is unenforceable or void (because it is, for example, illegal or against public policy), the courts may allow the rest of the provision to survive and be enforceable. For this to be the case, the offending part, as was put in a 2007 case, must be “capable of being removed without the necessity of adding to or modifying the wording of what remains” (the blue pencil test) and removal must “not so change the character of the contract that it becomes 'not the sort of contract that the parties entered into at all'”.
  • A black letter law. In common law jurisdictions, such as our own but more commonly in the USA, some legal principles are said to constitute black letter law because they are so fundamental, universal and entrenched that they are very unlikely ever to be challenged in court and are accepted by all. An example might be the fundamental components of a legally-binding contract (offer, acceptance, consideration and intention to create legal relations). It’s not entirely clear where the term originates but it might be because of the one-time practice of legal textbooks referring to precedents in a different and black typeface.
  • A white label agreement is an agreement between a manufacturer/service-provider and a re-seller, under which the manufacturer/service-provider sells generic goods or services to the re-seller, which are then sold to the end-user/consumer under the re-seller’s own label or brand, often nowadays on an e-commerce platform.
  • A red clause letter of credit. A typical letter of credit allows a seller exporting goods to be paid by a bank, so the letter underpins a sale of goods contract which will provide for payment to be made by way of letter of credit. Generally, after shipment, the seller will be required to present certain documents to the issuing bank, particularly the relevant invoice, before the bank will pay. A red clause letter of credit is different because it allows the bank in question to advance money (up to a specified amount) to the seller before shipment (so it is a form of financing (often to provide working capital to the seller) agreed by a buyer in particular circumstances, and clearly potentially risky to the buyer as an arrangement). It will normally contain a clause (traditionally printed in red) authorising the bank to make the relevant advance(s).
  • Grey market trading is where branded goods are brought into a country outside normal (approved or agreed) distribution channels (for example, by way of import from a country where they are cheaper). This may well not be illegal, but may breach intellectual property rights (for example, a manufacturer in a particular country producing branded goods may have agreed with the trademark owner that they are not to be exported to certain other countries).   

And to conclude on legal colours, why is a brief from a solicitor to a barrister tied with pink ribbon? The likely answer is because the practice started a long time ago for reasons now unknown (but which may relate to what the Church used to do with its own documents) and lawyers have carried on with it; which is a good enough answer to why a number of seemingly obscure legal practices continue to this day!

Clarkslegal, specialist Commercial lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Commercial matter please contact Clarkslegal's commercial team by email at contact@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

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Jon Chapman

Jon Chapman
Senior Consultant

E: jchapman@clarkslegal.com
T: 0118 960 4683
M: 07979 591 627

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Commercial team
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