Category Archives: Deep Dive

What Is the Circular Economy and Why Should We Care?

The world’s population is expected to reach nearly 10 billion in 2050, according to the United Nations. Yet, the earth’s resources are not limitless. Basic economic principles tell us that more demand, without a simultaneous increase in supply, results in higher prices. While this economic model of price determination is pretty straightforward, it highlights a pressing problem that humanity faces: the scarcity of resources. Our current economy is largely linear – we collect raw materials (take), turn those materials into products (make), use the products (consume), and discard them as waste when we do not need them anymore (dispose). This take-make-consume-dispose approach however is not sustainable.

The Solution

The circular economy is a systemic approach with the aim to eliminate waste and pollution, keep products and materials in use, and regenerate natural systems, according to the Ellen McArthur Foundation. There are several components to a circular economy that make our economic system more sustainable:

  • Maintain, prolong and share: By making products more durable though design, maintenance and repair, and by making products accessible to other users, the need for creating entirely new products that require resource input can be removed.
  • Reuse and redistribute: Certain materials and products, especially technical ones, can be reused multiple times or redistributed to new users. Sometimes, there may be a need to slightly change or enhance a product or material, but online marketplaces like eBay showcase that this is viable and already being done.
  • Remanufacture and refurbish: Both approaches refer to the restoration of the value of products. When a product is remanufactured, it is dissembled and rebuilt, with certain components being replaced when necessary. This results in an as-new condition of the product with the same warranty as an entirely new product. Refurbishment on the other hand refers to a cosmetic process where a product is repaired as much as possible but usually without dissembling it or replacing components.
  • Recycle: Recycling is an already well-known process where a product is reduced to its basic material level that can be used to manufacture new products. However, recycling is a lower-value process compared to the previously mentioned processes. This is because recycling results in a loss of embedded labour and energy, the costs of remaking products entirely are higher, and recycling inevitably results in material losses.
  • Cascades: The Ellen McArthur Foundation describes the cascades process as “[…] putting used materials and components into different uses and extracting, over time, stored energy and material order”. This is done until the material is ultimately returned to the natural environment as nutrients. An example of this, according to the foundation, is a pair of cotton jeans that first is turned into furniture stuffing, then into insulation material, and ultimately returned to the soil as nutrients after being anaerobically digested.

The circular economy promises many benefits for the environment and the whole economy. For example, increasing revenue from circular activities and more productive utilisation of resources may result in overall economic growth. There is also the possibility of job creation across industrial sectors and SMEs, and through increased innovation and entrepreneurship. The environment may benefit from lower carbon dioxide emissions, a reduction of primary material consumption, higher land productivity and enhanced soil health due to more nutritious fertilisers from natural sources rather than chemical ones.

Also, businesses and individuals can benefit from the circular economy. By lowering the cost of remanufacturing and introducing new revenue streams, companies can increase their profits. Also, by using more recycled inputs, a company can reduce the risk of volatile raw material prices. Moreover, the circular economy demands new business services, such as supply chain logistics to support the reintroduction of end-to-end products into the system, and new sales platforms to facilitate longer product use or higher product utilisation.

The Ellen MacArthur Foundation even suggests that a circular economy could result in a €3000 increased disposable income per EU household by 2030. Also, a circular economy could result in products that are better tailored to customer needs, resulting in more choice and higher perceived quality. Moreover, longer-lasting products would increase the convenience for customers since hassles with repairs and returns could be avoided. By introducing a circular economy in the food value chain, healthcare costs could be lowered that are related to pesticide use. Additionally, lower air pollution, lower water contamination, lower antimicrobial resistance and lower foodborne diseases, achieved by a circular economy in the food sector, could save up to 290,000 lives by 2050 that would otherwise be lost due to outdoor air pollution.

The Future

Currently, only 9% of the world economy is circular, according to the Circularity Gap Report 2019. However, the scarcity of resources makes a transition towards a circular economy all the more pressing, especially with a growing global population and other related issues like climate change. Major global brands (e.g. BlackRock, Google, 3M, Heineken, IKEA, McDonald’s, Apple and Microsoft), universities (e.g. UCL, Arizona State University and TU Delft), cities (e.g. Brussels, Milano and Toronto) and governmental bodies (e.g. the Danish Business Authority, the Scottish Government and the Republic of Slovenia) have already opted to learn, share knowledge and put ideas with regards to the Circular Economy into practice by joining the CE100 Network. The circular economy creates exciting opportunities for companies, organisations, the public sector and entrepreneurs alike, and it is likely that we will see a variety of innovative circular economy initiatives on both local and global scale in the not-so-distant future.

Meat Substitutes Are on the Rise, but What Does This Mean for the Meat Market?

Every day, more and more people are abandoning meat as part of their diet in favour of plant-based meat substitutes. The movement towards meat substitutes has been spearheaded to the mainstream by Millennials and Generation Zers as a statement against animal cruelty, an acknowledgement of newfound evidence linking meat products to certain cancers, and the harmful impact the production of meat (particularly beef) has on the environment. While the movement grows in popularity by the day, the business world carefully observes how the meat market is projected to develop.

Markets and Markets projects the meat substitutes market to grow from US$4.6 billion in 2018 to $6.4 billion by 2023. With billions of potential revenue still up in the air for the next few years, companies are flocking to fill in the gap in the meat substitutes market.

Startups specialising in the production of plant-based substitutes have seized the market opportunity presented to them. Beyond Meat, a publicly-traded meat substitute producer based in the United States, currently has a market capitalisation of over US$6 billion. The company became one of the most successful companies that went public in 2019. Although its valuation has decreased since a massive peak in the summer, Beyond Meat is poised to be a leader in the growing market. Its success demonstrates the massive potential in the meat substitutes market.

After Beyond Meat’s prosperous year, other producers of meat substitutes have been under pressure to separate themselves from the pack in the meat substitutes market. Impossible Foods is a popular producer of meat substitutes that is not (yet) public. One of their notable moves was their partnership with Burger King, who rolled out the Impossible Whopper near the end of 2019. Considering how well-marketed the Impossible Whopper was leading up to its release, the massive success of Beyond Meat since its initial public offering (IPO) may have compelled Impossible Foods to make a move that would increase their own publicity.

However, it is not just newcomers who are seizing opportunity in the market for meat substitutes. Massive meat producers have begun to produce their own plant-based meat substitutes. Such a strategy is a recognition that plant-based substitutes are no longer a niche component of the meat market. If the world’s established meat producers want to continue their dominance in the market, creating plant-based substitutes appears to be a must.

As the market for meat substitutes grows, the competition between startups and established companies will generally lead to one side triumphing over the other. In an age where globalisation is more of the standard than the exception, the large meat companies are advantaged by having the means to creating a globalised network for producing and distributing their products. However, public perception heavily favours the startups over the established companies. The growing awareness around the treatment of animals by meat companies has accelerated the growth of the plant-based diet movement. Ethically conscious consumers will resist buying plant-based products from the very companies that compelled them to abandon their meat-eating ways in the first place. Also, unlike the large meat companies, Beyond Meat and Impossible Foods are dedicated to sustainability and have embraced environmentalism as a core value. While the startups have broadcasted a clear mission as a part of their penetration into the market for meat substitutes, the large meat companies are simply reacting to demand without any substantive value at the core of their change in strategy. As the value-oriented Millennial and Generation Z consumers incorporate a larger and larger portion of the global consumer base, the dedicated actions of Beyond Meat and Impossible Foods should prove to outlast the reactionary actions of the large meat companies.

Considering that the plant-based startups seem poised for massive growth, the plant-based movement is officially here to stay. The value-driven approach of the startups will propel them into dominance of the meat substitutes market. Rumours of Impossible Foods going public after the success of Beyond Meat shows that investors are willing to engage in the meat substitutes market and also trust the startups to dominate the market in the future over the established meat producers. The sudden growth of both Beyond Meat and Impossible Foods also indicates just how much social movements can dictate the actions of businesses. Both companies’ focus on the environmental benefits of eating plant-based has resonated with younger consumers and has developed an appreciation of both companies’ efforts. By the day, consumers care more and more about what a company stands for rather than just what it sells, and the rise of plant-based producers and their disruption of the meat market is a practical example of just that.

The Globalisation of Sports Competitions

What is globalisation?

To begin, what exactly is globalisation? It is a commonly used term but it is worth noting that it also delves into other disciplines, not just business. When asked, different individuals give equally different interpretations of their definitions. Taking it from the business point of view, we can consider it to be the concept of treating the world as a single, integrated marketplace. However, if we asked an economist, they could say globalisation is more or less an expansion of global trade. In contrast, a sociologist might interpret globalisation as the sociocultural changes which stem from the international migration of both people and information. A political scientist could potentially define globalisation as the integration of laws which govern the interaction of states and global institutions. Given these differences in the definition of globalisation across different disciplines, understanding if sports have become truly globalised is not an easy task. 

Background

Without a doubt, international sports competitions have a long history. The first international sports match was a cricket match between the U.S.A. and Canada in 1844. The first international sports competition was the first modern Summer Olympic Games in Athens in 1896. However, its origins date back to Ancient Greece. The ancient Olympics do not count as international though because only men from Ancient Greek city-states and kingdoms were allowed to compete. It is worth noting that many early examples of international sports competitions took place in generally wealthier European or American countries and cities. Keeping the Summer Olympic Games example, it can also be observed that the subsequent seven editions took place in other European cities with the exception of the 1904 St. Louis Olympics in the U.S.A.

In recent years, there has been a noticeable shift in hosting rights to international sporting events. This can be observed through the 2010 FIFA World Cup, 2018 Winter Olympic Games and 2019 Rugby World Cup. 

All of these events had one thing in common – they were the first of their kind to be hosted in their respective countries and/or continents. The 2010 FIFA World Cup was the first to take place in the African continent. That summer, South Africa hosted 32 international teams and their fans. Last year, Japan became the first Asian country to host a Rugby Union World Cup. They hosted 20 international teams and their supporters over the September-November period. PyeongChang also became the first South Korean city to host the Winter Olympic Games in 2018. Hence, we can clearly see the more recent globalised trend in the hosting rights of large sports competitions.

Advantages

Naturally, we expect a diversification in host nations to possess a myriad of benefits, and they do, of course. Usually, these large-scale sports competitions take place in equally large cities. Hosting such a popular event and experiencing a large influx of foreign tourists can have a significantly positive impact on the host nation’s economy. During their stay, visitors pay to be spectators at the event but also stay in local accommodation and cover their necessary daily expenses. A Deloitte report estimates that Rugby World Cup visitors alone can directly contribute between £200-810m GBP into the host nation’s economy. Large companies, especially in the hospitality industry, certainly benefit but local, small and family-run businesses also benefit from such a large inflow of tourists. 

FIFA reports that during the 2018 FIFA World Cup in Russia, 3.4 million foreign tourists visited all eleven host cities. That is a remarkably large number, without counting the number of tourists that went to less than the eleven Russian host cities and the 3.4 million Russian fans who travelled to all eleven host cities as well. Another benefit would also be the increased cultural awareness and cohesion that is fostered at these types of events as locals get to meet other foreign visitors and vice versa. In this aspect, sport really does become more globalised both in a sociological aspect but also commercially as event tickets are sold to people from all over the world. Taking the example of the 2019 Rugby World Cup, SportsPro reported that the final between England and South Africa saw a record attendance of 70,103. Official ticket prices sold for maximum 100,000 Japanese Yen which is roughly $900 USD, without counting resold tickets. Two Category A tickets even sold for an estimated $31,700 USD on a ticket reselling website.

Host nations can also potentially exploit a boost in their international rankings, if they defy expectations and perform above what was expected of them. Japan, as host nation of last year’s Rugby World Cup is a great example of this. Japan has qualified for every edition of the tournament since 1987 but did not experience great success. In all of the editions before 2019, they were always knocked out of the competition at the pool stage. Japan’s ranking in rugby union increased slightly after the competition. They went from ninth to eighth best in the world. A relatively successful host nation who surprises their fellow competitors can inspire other countries as well. Why? Seeing another country with little experience in both hosting large sports events and competing at the highest level in the chosen sport could potentially encourage another country with a similar background to want to host the next edition. An unexpected but successful host nation could lead to a large surge in popularity in the particular sport, as seen by the large surge in Japanese rugby fans after seeing their country’s success. 

Disadvantages

However, there are downsides to allowing countries with little hosting experience to organise a huge, international sports competition. Such large sports competitions are often surrounded by equally large scandals or money mismanagement accusations. Brazil, hosts of the 2014 FIFA World Cup and the 2016 Summer Olympic Games in Rio de Janeiro, were surrounded by scandals regarding the two competitions. The Brazilian government was lambasted by both national and international media for abandoning the infrastructure they built exclusively for both events. Last year, Business Insider remarked that Brazil spent $3 billion USD in building new stadiums for the 2014 FIFA World Cup. One particular stadium, the Arena da Amazonia in Manaus, cost the Brazilian government between $220-300 million USD, as well as the lives of three workers who died during construction. This stadium now sits on an abandoned and derelict site. In 2017, Business Insider again reported that the Olympic Village apartments built for the 2016 Rio Olympics (and worth $700 million USD) were abandoned. They were meant to be turned into luxury condos and sold after the Olympics but only 7% were actually sold. This of course, further infuriated locals. 

The next edition of the FIFA World Cup is due to take place in Qatar in 2022 although that has already been met with fierce criticism of the alleged human rights violations of migrant workers working on Qatari stadiums. Amnesty International estimates that there are 1.7 million migrant workers in Qatar. They are allegedly paid less than what the recruitment agency in their native countries promised them and have had their passports confiscated so they cannot go back to their respective countries. These examples reflect a failure in achieving globalisation from the political science perspective as regulations in these countries are not as fiercely imposed such as the ones in Europe for example. Experienced European host nations are usually not met with such large scandals as they have a more accomplished background in organising such large-scale competitions. 

To conclude, these statements raise the question of whether inexperienced countries should be trusted with such a large responsibility or not. The attempt to globalise sport by reaching other audiences is predominantly welcomed worldwide but certain failures in previous competitions undermine the potential success of the concept of globalised sport. Can inexperienced countries provide the necessary infrastructure such as enough public transport routes and accommodation to withstand the very large volumes of incoming spectators? For the most part, this is usually achieved but unethical abandonment of this infrastructure once the competition is over is unfortunately often a recurring event. These are complex questions which have led to numerous debates on the matter and varying opinions which are of course, a product of personal interpretation. However, one thing is certain, the increase in the diversification of hosting rights of international sports competitions has undoubtedly started. The real question is whether it will continue or not.

"The Power of Diversity": 3 Takeaways from the SMF's Leadership Perspective Series

Last night was the concluding conference of this years Leadership Perspective Series, organised by Trinity’s own Student Managed Fund, the first of its kind in Europe. The speakers invited to this conference were, for a lack of a different expression, very diverse. Declan Curry, a Northern Irish journalist, moderated the discussion between panelists Heather Melville (Director and Head of Client Experience for PwC UK), Brian O’Sullivan (CEO of Fulfil Nutrition), Cecil Martin (Sky Sports Broadcaster, Motivational Speaker and Former NFL Fullback) and Amanda Pullinger (CEO of 100 Women in Finance). Between the many questions asked by audience members and the former NFL player Cecil Martin asking everyone to stand up and stretch, the conference was an incredibly insightful experience into how leaders look at diversity and how they have been affected by it.

1. Diversity of Thought

This was probably the most talked about topic of the night. Each speaker offered a unique perspective into what they believed was the most vital type of diversity: thought. Overall, the panelists agreed that diversity of thought implies the breaking of the fundamental barrier of following the easiest path and rejecting challenges to one’s own ideas. O’Sullivan mentioned that at the start of his time with Fulfil Nutrition, he noticed the company had, unlike industry giants with very rigid structures, a culture that incentivised openness to learning and challenging ideas, which in turn led to the creation of an extremely diverse team. Cecil Martin also added to this in that his recommendation was to ‘strengthen as many “muscles” as you can’, in the sense that one should be involved in as many things outside their own skillset as possible. In other words, in order to grow as a leader within business, one needs to grow in other areas which will then feed unique ideas into an organisation. Pullinger approached this idea by accepting that as leaders, business people need to acknowledge the fact they don’t know everything, and that for a team to be successful, being diverse in terms of age, gender and specially ethnicity is essential, as research has already shown.

2. The Power of Visibility

During the discussion, it was stressed how important it is to have role models, who give visibility to minorities across a range of senior positions. Melville mentioned how not being able to see people like yourself in these positions makes it almost impossible to see yourself up there, and that the path you would need to take is practically invisible. Organisations should be, in theory, fishing in diverse talent pools for new positions but directorial boards of most large corporations still tell a story of inequality that is becoming less and less antiquated as new generations enter the workforce demanding diversity as a basic pillar of organisational culture. Pullinger’s 100 Women in Finance launched an initiative to put some of the world’s very few fund managers, who make up for an alarmingly small proportion of total fund managers across the world (around 7% and numbers haven’t changed much for 30 years), in the frontline of the media, in their website and even supporting a handful of these fund managers to pitch at American news channels. Pullinger said that the results were clear from the get-go: the women brought diversity to these panels on television, and with that came new ideas and discussions. Being exposed to the general public allows these women to become role-models, and inspire a younger generation of soon-to-be female leaders.

3. Authenticity

Another recurring theme throughout the night was authenticity. The panelists agreed that believing in oneself and being confident in the skills one acquired during college and with extracurricular activities are what can set apart a successful candidate when it comes to job hunting. The best talent comes in the form of diverse candidates that have been able to gather skills in a wide range of specialties, which makes them able to reach a level of problem solving that will be hard to replace with AI. Furthermore, Melville commented that knowing one’s self-worth is extremely important as you rise through the ranks of the organisation. It’s important to be grateful , she says, but it’s even more important to know that you’ve worked hard and that you deserve to be where you are and that it was your skills and competence that are leading you through the corporate ladder. This becomes especially relevant when the discussion turns to diversity policies and quotas that may not necessarily pick candidates based on their skills, but rather as a tool for image improvement.

Finally, it appears that organisations have realised that diversity is something that has to be rooted in their cultures for them to remain relevant for the generations to come, which will continue to demand more diversity at the bottom as well as at the highest ranks. Without this diversity, any company will face the risk of becoming obsolete and inefficient when compared to those who have truly embraced it. These will be the companies that will head into the future with an enormous advantage, as their leaders finally begin to realise the power of diversity.

Platforms Outperform Their Competitors – Here’s Why

By Jan Keim

Maybe you have heard the following statement by Tom Goodwin already: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.”. Clearly, when looking at the many examples of platforms disrupting industries, there is something interesting going on. Let’s dive deeper into the logic behind the so-called platform economy.

The Fundamentals

Traditional business models are designed around buying some sort of raw material, manufacturing a product and selling it to customers, or gathering people to deliver services. When looking at digital business models, this logic does not apply. Multisided platforms, or “matchmakers” as they are sometimes called, provide one or multiple groups of people with access to other groups of people and facilitate the interaction. At least one group of people perceives the facilitation of the interaction with another group as value they are willing to pay for. For example, Uber drivers can earn money by getting connected to riders via a platform, a service both groups value. Drivers benefit from the frequency of rides, and riders benefit from availability, transparent pricing, and transparent quality due to the rating mechanism.

The interdependence of demands has long been ignored in business, until Geoffrey Parker and Marshall Van Alstyne published the first peer-reviewed article on this topic in 2000. Since then, many platforms have emerged and pushed the boundaries of different industries, including hospitality, retail and transportation. But what exactly makes such platforms better than traditional businesses?

Network Effects, Curation and Excess Value

As middlemen, platforms benefit from the value created by letting groups of people with specific needs interact with each other to satisfy those needs. This means that platforms facilitate the exchange of goods, services or social currency (e.g. “likes”). For multisided platforms, network effects are crucial to their business models. There are two types of network effects that either can be positive or negative: same-side or cross-side network effects.

  • Positive same-side network effects come into play if an increase in participants on one side creates additional value for the same side. An example of this is WhatsApp, where users benefit from more people they can chat with.
  • Negative same-side network effects happen if additional players on the same side have a negative impact on the others, e.g. on a marketplace like eBay where people try to sell substitute goods to the same customer group.
  • Positive cross-side network effects happen when one group benefits from an increase of participants on the other side. Marketplaces such as Amazon create value for customers not only because of the delivery of goods, but also because the selection of goods is much bigger compared to traditional retailers.
  • Negative cross-side network effects, while rather rare, refer to a decrease in value for the opposite side should an additional player enter the other group. An example of negative cross-side network effects is advertisement, where more advertisers may have a negative impact on the user experience.

Network effects, in fact, are so important to a platform business that some companies are willing to pay one side to attract the other side. For example, companies like Sony (PlayStation) or Microsoft (Xbox) sell their gaming consoles at a loss. However, the more people own a certain console, the more attractive game development for those consoles becomes, which represents a main revenue stream for Sony’s and Microsoft’s gaming divisions.

Because effective matchmaking is the key to generating value, curation is a core competency in the platform economy. Curation refers to a mechanism that ensures successful matchmaking. Such mechanisms may consist of rating systems, filters or algorithms. Curation ensures that a customer on one side finds the right partner on the other side. If a platform business fails to ensure effective matchmaking, chances are high that the business fails. Imagine what would happen if Airbnb keeps failing at showing you available rooms that match your budget and location preferences, or if Amazon kept showing you irrelevant products without the possibility to filter based on what you are looking for.

Multisided platforms rely on technology for value creation. The technology enables platforms to deliver four sources of value that would not exist without them, so-called “excess value”. Customers benefit from access to value created on the platform (e.g. videos on YouTube), producers benefit from access to a community (e.g. Airbnb), and both sides benefit from tools and services that facilitate their interaction (e.g. Kickstarter) as well as from the curation mechanism that enhances the quality of their interactions.

The Chicken-and-Egg Problem

When deciding on building a multisided platform, there is one key challenge that many start-ups fail to overcome: the chicken-and-egg problem. Each group on a multisided platform depends on the presence of the other group(s). Without both groups on the platform at the same time, the value proposition cannot be delivered. Therefore, when starting off, a platform business needs a strategy on how to attract all relevant sides so that effective matchmaking can take place. There are different strategies a platform business can use to overcome this dilemma, for example:

  • The Micro-Market Strategy: By making the platform accessible to Harvard students only, Facebook overcame the chicken-and-egg problem by targeting a tiny market of members that already interacted with each other on campus.
  • The Big Bang Adoption Strategy: Tinder launched at a frat party at the University of Southern California. Within a short period of time, the company was able to attract a high volume of sign-ups immediately.
  • The Follow-the-Rabbit Strategy: Amazon started off as an online retailer to build a database of users and producers. Later, the company pivoted into a platform that helped producers and consumers match with each other.

What the Future Holds

Looking at the success stories of platform businesses, it is not far-fetched to assume that further disruption of industries will take place in the future. Traditional businesses should ask themselves how they can react and possibly benefit from platforms in order to avoid being pushed out of the market. In fact, some big and traditional brands have already started implementing platforms to create additional value for their customers, such as Nike with its NikePlus platform, or Under Armour with MyFitnessPal and Endomondo.

Acknowledgement

This article is based on the content delivered by Conor Foley during the Digital Business Models module at Trinity Business School. Conor is studying for a PhD in the area of digital business models. His particular area of interest relates to multisided digital platforms and the way in which they achieve sustained competitive advantage and accelerated growth.

Commercial Law’s Fear of Electrocution – An Analysis of the Law’s Reluctance to be Energetic in Deeming Energy as a “Good”. Is Change a “Good” Idea?

By Luke Gibbons

It is unquestionable that commercial entities, would not function without energy supply. Further, as Bridge outlines, “there is no doubt that energy…[can be] bought and sold”. (Benjamin’s Sale of Goods,9th.edn.2014). Thus, the fact the judiciary and legislator have failed to clarify whether such constitute “goods” under the Sale of Goods and Supply of Services Act 1980, and therefore, accrue heightened remedial availability than “services”, while providing no definition of “services”, and as White states, no principled reason why this protectionism to goods exists, is abhorrent.(White,Commercial Law,2nd.edn.2012).

It is regrettable that a definition requiring tangibility, from a period when energy was not paramount is stifling jurisprudential and legislative development, as “there are …difficulties attributing to energy … legal qualities of… physical objects”.(n1) Consequently, a multijurisdictional solution has developed, distinguishing “bottled” from “flowing” energy, as held in Bradshaw v Bothe’s Marine[1973]35.DLR.(3d)43, with the former being deemed “goods”. Although unfavourable in an already uncertainty area, it is submitted, such may be necessary. This is contended as Part IV of the 1980 Act only implies “terms” akin to “conditions” implied to sale contracts, if a contract is held to be for supply of services, and following Carroll v An Post National Lottery[1996]1I.R 433, a narrow view of  such is proffered. Thus, one contends, if this distinction was not held, there would arguably be no protection for commercial entities who buy “bottled” energy, as such may not be deemed a service, and also, not be subject to the proposed Consumer Rights Bill 2015.

Further, it is argued, the definition’s impact is exacerbated, as energy is considered a “good” in many Statutes such as, the Consumer Protection Act 2007. In spite of such, one must question, to remedy this arbitrary distinction, is it feasible for energy in general to be deemed a “good” under the 1980 Act, now that “services” are offered protections?

It is arguable, the dearth of cases may warrant maintaining the status quo. Furthermore, it is contended, if energy constituted a “good”, s.35 may be invoked, deeming acceptance by “use”, being an act inconsistent with the seller’s ownership. However, it is noted, as such is expressly subject to s.34(1) allowing for reasonable inspection, and as such allows operation, subsequent to Benstein v Pamson Motors Ltd[1987]2.All.ER.220, the “use” of energy uncovering a “latent defect” for instance, may give rise to more favourable remedies to “buyers”.

Nevertheless, a determination that energy is a “good” may arguably detrimentally effect remedial availability. Currently, in energy being a “service”, implied terms are “innominate terms”, warranting damages or termination depending on the breach’s seriousness, as denoted from Hongkong Fir Shipping v Kaawasaki Kisen Ltd[1962]2Q.B..26. However, it is contended, if deemed a “good”, claims would likely be made under s.11(3) of the 1893 Act, arguing; if some energy was consumed prior to rejection, a partial rejection occurred, and thus, implied conditions would be converted into warranties, with damages being the only remedy. Further, although White requests allowance of partial rejection as in the UK, it is argued, such would not assist as energy would likely be subject to the “commercial unit” exception. Thus, the only solution to this quandary may be “freedom of contract” in allowing such, although as monopolised energy suppliers are often the dominant party, this seems unlikely.

Furthermore, retention of title clauses are hallmarks of sales contracts, as such provide remedies for sellers, when “goods” are sold on credit. Although, White contends such are common where “goods” are consumed before credit periods end, the recent case of PST Energy v OW Bunker Ltd[2016]UKSC23 held, in relation to fuel, one cannot obtain title to something that no longer exists, so it cannot be a transaction with such at its heart. Thus, it is argued, in undermining a key remedy when buyers become insolvent, and a foundation of credit arrangements, this holding encapsulates why deeming energy as “goods” is unworkable.

It is submitted, due to the difficulties outlined, the Sales Law Review Group’s recommendation to hold implied terms for services as “conditions” in legislation should be adopted. Although, it is noted, this may not fully remedy the remedial deficit offered to “services”, such would allow commercial users of differing energy forms, seek relatively equal remedies bringing some homogeneity to the law.

No Basis for “Basis of Contract” Clauses! Time to Abolish?

By Luke Gibbons

The judicial unease lamented in Keating v New Ireland Assurance [1990]2.I.R.383 surrounding “basis of contract” clauses is well founded.  However, it is contended, that this disapproval is frivolous, as notwithstanding such, these clauses are upheld by Irish courts. This allows insurers, often the more powerful contracting party, convert a pre-contractual representation into a warranty, and thus, gives the insurer a right of repudiation. It is argued, this consistently leaves the insured bearing the loss, and in so doing, undermines the premise on which insurance is based, that being, protecting against future losses. Furthermore, it is submitted, that the rationale used by the courts in upholding these clauses is flawed and in deeming such as valid, the courts are running the risk of ironically circumventing the materiality burden in misrepresentation and nondisclosure, as developed by said courts to protect the insured.

In Keating, the recognised rationale in validating these clauses was freedom of contract. Although, this seems infallible, as two legal entities are willingly entering an agreement. It is contended, that in the insurance context, such does not consider the idiosyncratic reality of these transactions, and ultimately, the inherent imbalance of power between the parties. One argues such, as every business, no matter how powerful, is required to have insurance in some respect. Therefore, it is submitted, as these entities must enter into contracts with insurers, often having no choice in so doing, and not being subject to the EC (Unfair Terms in Consumer Contracts) Regulations 1995; the courts in upholding “basis clauses”, on the grounds of freedom of contract, are failing to acknowledge this inherent imbalance in commercial insurance agreements. The insured is not free to enter into a contract at all, the insured must enter into a contract to avoid future losses and being in breach of relevant law.

As held in Keating, non-disclosure or misrepresentation can only render a contract void if such facts are deemed material, and it is proven that these were known to the insured during declaration. However, “basis clauses” differ, and as denoted from Keating, any undisclosed information, no matter how insignificant, if under a “basis clause” may lead to repudiation. Although post-Keating, “basis clauses” must be outlined in clear terms and if ambiguous the contra proferentem rule shall apply, such judicial intervention is inadequate. It is submitted, the holding, by confirming the validity of “basis clauses”, still arguably allows insurers use suchto circumvent the burden of proving materiality, and ultimately, undermine a threshold designed to protect the insured.

Thus, it is undisputed that reform is needed, however, the question still lies: should “basis clauses” be unlawful? There is some credence in the New Zealand approach, which incorporates a “materiality test” in accessing non-disclosure and misrepresentation under “basis clauses”; much like the approach to warranties in this jurisdiction and the guidelines promulgated in Irish self-regulations. It is argued, that on one hand, this would bring homogeneity to the treatment of warranties, and ultimately, ground “basis clauses” in their foundational origin, that being, as Foss states, “[use] …with…clauses permitting the insurer to avoid the policy… [due to] …material misstatement” (‘Good Faith and Insurance Contracts’ 2010). However, on the other hand, the plaguing question of what is material would still exist. Furthermore, is it contended, that if such is adopted, insurers would cease using “basis clauses” anyhow, as such would not have the “trap[ping]” effect they are designed to have, as described in Zurich General Insurance Co Ltd v Morrison [1942]2.K.B.53. However, reliance on insurers ceasing use and the unpredictability surrounding materiality is too uncertain a basis upon which insurance law should develop.

Therefore, in agreement with the Law Reform Commission, it is proffered, that the Australian approach be adopted, banning “basis clauses” entirely, as such is definitive, and in turn, champions certainty in commercial law. This is also advanced, as Buckley ((2005).12 Commercial Law Practitioner 10) laments, the current self-regulation is “inadequate”; a view solidified by CB Justice v St Paul Ireland (Circuit Court 25/11/2004).  Nevertheless, it remains to be seen whether the Oireachtas will stifle this unacceptable practice and remedy the unfortunate reality as described in Anderson v FitzGerald (1853)3.ICLR.475, that “basis clauses…[render the policy] not worth the paper upon which it is written”.

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