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Contracts and coronavirus (3/5)

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Published 1 April 2020

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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.

Our previous posts in this week’s series discussed the relevance of termination and force majeure provisions in commercial contracts where performing contractual obligations is no longer viable. However, in many cases, rather than resorting to these clauses, it will be more practical in the first instance to engage openly with your customers and suppliers about the effect COVID-19 is having on your business. You may well find that the other parties in your supply chain are sympathetic. In such cases, rather than explore termination or suspension options, the contract itself can be amended (or ‘varied’) by agreement with the relevant counterparty.

You may have already agreed to do this verbally with certain customers or suppliers, but we would strongly recommend setting out any variation to a contract in writing, and having this signed on behalf of both parties. This way, there is no risk of a dispute later on as to what the varied terms were, or how long they would last for. Unless the variation is executed as a deed, you and the counterparty will need to state what the ‘consideration’ is to make the variation legally binding (this concerns what needs to be promised by one party to the other to receive promises or obligations in return – essentially, it is an exchange for something of value). If you need assistance in documenting a variation to an existing commercial contract, our Commercial team can help to draft and negotiate this.

You can find more coronavirus-related resources from Collyer Bristow here.

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Shorter Reads

Contracts and coronavirus (3/5)

Published 1 April 2020

Authors

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.

Our previous posts in this week’s series discussed the relevance of termination and force majeure provisions in commercial contracts where performing contractual obligations is no longer viable. However, in many cases, rather than resorting to these clauses, it will be more practical in the first instance to engage openly with your customers and suppliers about the effect COVID-19 is having on your business. You may well find that the other parties in your supply chain are sympathetic. In such cases, rather than explore termination or suspension options, the contract itself can be amended (or ‘varied’) by agreement with the relevant counterparty.

You may have already agreed to do this verbally with certain customers or suppliers, but we would strongly recommend setting out any variation to a contract in writing, and having this signed on behalf of both parties. This way, there is no risk of a dispute later on as to what the varied terms were, or how long they would last for. Unless the variation is executed as a deed, you and the counterparty will need to state what the ‘consideration’ is to make the variation legally binding (this concerns what needs to be promised by one party to the other to receive promises or obligations in return – essentially, it is an exchange for something of value). If you need assistance in documenting a variation to an existing commercial contract, our Commercial team can help to draft and negotiate this.

You can find more coronavirus-related resources from Collyer Bristow here.

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