Shorter Reads
Contracts and coronavirus (4/5)
1 minute read
Published 2 April 2020
Key information
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.
One major impact on businesses resulting from the coronavirus fallout will be on their cashflow. In order to mitigate this, your business can take steps now to address this by building in protective provisions in contracts that it enters into with new customers and suppliers.
For example, consider insisting in your standard terms and conditions that you have a longer payment period than you might usually offer (payment within 30 days of receiving an invoice is common across many sectors, but, depending on your bargaining power, you could negotiate up to 60 days). Conversely, you could stipulate shorter payment periods for your own customers. Of course, whether the counterparty will accept this will depending on the strength of your bargaining position.
Where you are acting as the supplier, you could also state in your standard terms that late payments will be subject to statutory interest (rather than stipulating a specific figure for the interest rate). Under the Late Payment of Commercial Debts (Interest) Act 1998, the annual interest rate on late payments is currently 8.1%, which is above what is frequently agreed between many contracting parties. You could also include a right to terminate for missed payments, as well as the right to suspend performance if a customer has not paid a previous invoice in time.
If your business is purchasing goods or services from another party who proposes all three of these consequences for late payment, you could, as a customer, argue that this is excessive and negotiate the terms of the contract accordingly.
In our final post in this series tomorrow, we will suggest additional provisions that you can include in your terms and conditions to give further protection to your business in these uncertain times. In the meantime, you can find more coronavirus-related resources from Collyer Bristow here.
Back to InsightsThe 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.
One major impact on businesses resulting from the coronavirus fallout will be on their cashflow. In order to mitigate this, your business can take steps now to address this by building in protective provisions in contracts that it enters into with new customers and suppliers.
For example, consider insisting in your standard terms and conditions that you have a longer payment period than you might usually offer (payment within 30 days of receiving an invoice is common across many sectors, but, depending on your bargaining power, you could negotiate up to 60 days). Conversely, you could stipulate shorter payment periods for your own customers. Of course, whether the counterparty will accept this will depending on the strength of your bargaining position.
Where you are acting as the supplier, you could also state in your standard terms that late payments will be subject to statutory interest (rather than stipulating a specific figure for the interest rate). Under the Late Payment of Commercial Debts (Interest) Act 1998, the annual interest rate on late payments is currently 8.1%, which is above what is frequently agreed between many contracting parties. You could also include a right to terminate for missed payments, as well as the right to suspend performance if a customer has not paid a previous invoice in time.
If your business is purchasing goods or services from another party who proposes all three of these consequences for late payment, you could, as a customer, argue that this is excessive and negotiate the terms of the contract accordingly.
In our final post in this series tomorrow, we will suggest additional provisions that you can include in your terms and conditions to give further protection to your business in these uncertain times. In the meantime, you can find more coronavirus-related resources from Collyer Bristow here.
Need some more information? Make an enquiry below.
Enjoy reading our articles? why not subscribe to notifications so you’ll never miss one?
Subscribe to our articlesMessage us on WhatsApp (calling not available)
Please note that Collyer Bristow provides this service during office hours for general information and enquiries only and that no legal or other professional advice will be provided over the WhatsApp platform. Please also note that if you choose to use this platform your personal data is likely to be processed outside the UK and EEA, including in the US. Appropriate legal or other professional opinion should be taken before taking or omitting to take any action in respect of any specific problem. Collyer Bristow LLP accepts no liability for any loss or damage which may arise from reliance on information provided. All information will be deleted immediately upon completion of a conversation.
Close
