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Contracts and coronavirus (5/5)

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Published 3 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.

As this is the last post in this week’s series, today we will give some practical tips about what to ensure your standard terms and conditions include from now on, in case (for instance) we encounter a ‘second wave’ of the pandemic later this year or next year. We would suggest:

a) where you are the supplier:

  • ensuring any force majeure clause in contracts you are negotiating or planning to enter into explicitly refers to pandemics and epidemics, and includes a right to terminate if the force majeure event continues for more than a certain period of time (this may not be enough for you to rely on this, particularly as COVID-19 is no longer something unforeseen, but it could help in certain situations); and
  • including wording to the effect that no force majeure event exonerates a party’s payment obligations, and consider having a right to terminate if the customer does not pay on time; and
  • where possible, using wording that refers to using your reasonable endeavours to undertake something, rather than agreeing outright to do it (this may give you a little leeway, depending on the circumstances).

b) where you are the customer:

  • where possible, insisting on your own standard terms, which should take the opposite position to the above tips for suppliers;
  • negotiating longer payment timescales, in case of cashflow difficulties, as well as a lower interest rate for late payments; and
  • seeking provisions giving you priority if there is an adverse impact on the supplier’s ability to provide you with the goods/services you are purchasing, so that you are first in the queue for any scarce resources.

We hope you’ve found this week’s series of posts on contracts and coronavirus helpful. You can find additional COVID-19-related resources from Collyer Bristow here. If you have any specific queries regarding your business’s contracts, our Commercial team is on hand to help.

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Shorter Reads

Contracts and coronavirus (5/5)

Published 3 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.

As this is the last post in this week’s series, today we will give some practical tips about what to ensure your standard terms and conditions include from now on, in case (for instance) we encounter a ‘second wave’ of the pandemic later this year or next year. We would suggest:

a) where you are the supplier:

  • ensuring any force majeure clause in contracts you are negotiating or planning to enter into explicitly refers to pandemics and epidemics, and includes a right to terminate if the force majeure event continues for more than a certain period of time (this may not be enough for you to rely on this, particularly as COVID-19 is no longer something unforeseen, but it could help in certain situations); and
  • including wording to the effect that no force majeure event exonerates a party’s payment obligations, and consider having a right to terminate if the customer does not pay on time; and
  • where possible, using wording that refers to using your reasonable endeavours to undertake something, rather than agreeing outright to do it (this may give you a little leeway, depending on the circumstances).

b) where you are the customer:

  • where possible, insisting on your own standard terms, which should take the opposite position to the above tips for suppliers;
  • negotiating longer payment timescales, in case of cashflow difficulties, as well as a lower interest rate for late payments; and
  • seeking provisions giving you priority if there is an adverse impact on the supplier’s ability to provide you with the goods/services you are purchasing, so that you are first in the queue for any scarce resources.

We hope you’ve found this week’s series of posts on contracts and coronavirus helpful. You can find additional COVID-19-related resources from Collyer Bristow here. If you have any specific queries regarding your business’s contracts, our Commercial team is on hand to help.

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