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Contracts in the time of COVID

10 Nov 2020

As some parts of the economy reopen (and then close again…!) and everyone is trying to get their commercial interests back on track, there will inevitably be a whole host of contractual issues arising from the Covid-19 pandemic and the resulting lockdowns.

If you are having difficulties with suppliers, customers or any other parties we suggest turning first to the contract/terms and conditions governing those relationships.  Looking at the following key provisions is a good starting point and we will be happy to help address any issues you have with getting back to business:

Terms & conditions – Top 10 key clauses to review when problems arise and the questions to ask

1 Parties
It often happens that businesses think they are contracting with one party (for instance a limited company) when in fact the relationship is with another (such as a sole trader).  Check to see who agreed the T&Cs and whether they are still trading in the same capacity.

2 Delivery
Delivery is often where problems arise in a supply contract.  It is important to be clear as to who is responsible for delivery and who pays for that delivery. In these difficult times it is also key to know what happens if there is a delay in delivery.

3 Price and payment
Where supply chains are under strain prices can fluctuate and the availability of stock can be an issue.  If all goods ordered cannot be supplied, is there provision to review the price?  When is payment due and can the quality of the goods be checked before payment is made?

4 Retention of title, risk and insurance
In difficult economic times it is inevitable that the solvency of some businesses will be threatened. Where that is a concern title (ownership) of goods can be retained by the supplier, even after delivery, until payment is made in full. NB check the insurance arrangements!

5 Liability
Lots to think about here.  If something goes wrong, who pays for that? Is there a limit on the amount one party has to pay or are there restrictions on the types of losses that can be claimed from the other party? E.g. can you claim for loss of profit?

 

Contracts (LinkedIn)

6 Warranties and indemnities
Warranties are essentially promises made to the other party e.g. regarding the quality of goods supplied or the ownership of intellectual property.  Indemnities effectively require the party making the warranty to pay for any losses resulting from a breach of that ‘promise’.

7 Dispute resolution
Some T&Cs set out a specific process for disputes, e.g. reference to an expert or escalation to specific people within the business. Often this is aimed at avoiding court proceedings and certain steps might need to be completed before court action can be taken.

8 Termination
What if you need/want to end the agreement? The termination clause should set out how/when you can do that.  If termination is due to a breach the position, notice requirements and timing might be very different to those covered in the T&Cs.

9 Force Majeure
This type of clause is now more relevant than ever. Often described as an ‘act of God’ clause, this will set out when the agreement can be terminated or varied because of events that are out of the control of the parties. Those events may or may not include a global pandemic!!

10 Governing law and jurisdiction
Highly relevant to international/cross border contracts and can have wide ranging ramifications.  This clause sets out the law that applies to the agreement (e.g. Law of England and Wales) and where any claims should be brought (e.g. English Courts).

Please do not hesitate to get in touch with Lucy Gray if you have any questions, and to find out how we can help.