Monthly Archives: March 2020

The COVID-19 pandemic will likely continue for some time. To help your business adjust to these uncertain times, each day this week we are posting on what to keep in mind concerning your business’s commercial contracts.It’s likely we’ll see an increase in businesses attempting to rely on ‘force majeure’ clauses in order to alleviate some of their obligations during this uncertain time. If you haven’t already, our Commercial team’s recent article on the subject is well worth a quick read.Force majeure clauses are usually buried towards the end of a contract. Their intention is to suspend or terminate contractual obligations in the event of certain circumstances beyond a party’s control – typically, they cover events such as fire, flooding, and nuclear explosion. Whether your business will be able to rely on a ‘force majeure’ clause to suspend its performance of an existing English-law contract will depend on that contract’s specific wording, since ‘force majeure’ does not have a set statutory meaning in English law and must be specifically defined in the contract.Even if a force majeure clause doesn’t specifically refer to a pandemic or an outbreak of infectious disease, a party wishing to rely on it is likely to argue that other expressions used within it could cover the coronavirus fallout – so expect those customers or suppliers seeking to suspend performance of their obligations to make a case for relying on terms like ‘economic downturn’, ‘act of God’, or ‘outside a party’s reasonable control’. We’d recommend reviewing your key contracts and ensure you fully understand your rights and obligations under the relevant force majeure clauses. It may be that your customers or suppliers that try to rely on this may fall short of the requirements of the clause, since a party seeking to rely on it would usually need to demonstrate that coronavirus has adversely impacted on their ability to perform the contract. Often, the wording is that the event must have ‘prevented’ the performance, rather than merely hindered it. In many cases, then, this hurdle might be too difficult to rely on if COVID-19 simply made performance of a contract difficult or more expensive, rather than impossible.We’d recommend keeping clear records of any relevant factual and economic evidence concerning the coronavirus fallout that you think is relevant to your commercial contracts, as these could prove useful when seeking to rely on or rebut a force majeure claim.An alternative to relying on force majeure is the doctrine of frustration. You can find out more about that in our Commercial team’s recent article on the subject.You can also find more coronavirus-related resources from Collyer Bristow here.

The COVID-19 pandemic will likely continue for some time. To help your business adjust to these uncertain times, each day this week we are posting on what to keep in mind concerning your business’s commercial contracts. If you haven’t done so already, now’s the time to review your key supply and sales contracts and determine which critical ones are likely to be impacted the most by the coronavirus outbreak, so that you can plan accordingly. If you sell goods or services under an existing contract and no longer wish to do so because current circumstances make it economically unviable, you may be considering terminating the contract. This should be considered carefully, as this could have reputational repercussions in the current climate. You will of course need to take into account the effect of any such termination on your business relationship with your customer.Some contracts, if they explicitly state this, allow you to terminate for convenience (i.e. without cause), so if this is an option available to you and the required notice period to terminate is sufficiently short, consider whether you wish to cut your losses. Be aware, though, that many contracts do not include provisions that allow for termination for convenience. In that case, unless you can rely on another termination provision (for example, if you think you won’t get paid from a struggling business, you could consider whether you could rely on any termination provisions for insolvency or ceasing business), it’s unlikely you will be able to end an English-law contract without breaching it. Ultimately, this will depend on the contract’s wording. Remember, if you do decide to terminate, it is important to observe any requirements set out in the contract for serving notice; if the notice is invalid, then termination may not be effective.If COVID-19 seriously impacts on your performance of a contract, terminating it isn’t necessarily your only (or even best) course of action. Later this week, we will consider other options where performance is impacted, including variations to contracts and relying on ‘force majeure’ clauses. In the meantime, you can find more coronavirus-related resources from Collyer Bristow here.