Shared & Halved - Business Leaders series: Commercial contracts

We held a webinar for business leaders dealing with issues arising from commercial contracts in light of the unique challenges now posted by COVID-19. Read about the main issues raised or listen to the webinar recording.

Introduction

Coronavirus COVID-19 is a crisis unlike any other we have faced as a country, presenting a new and varied set of challenges to UK and global businesses.

Based on what you’ve told us is most pertinent to you in the current climate, we have devised a series of webinars aimed at you, business leaders, to look at implications of the outbreak. In this webinar we looked at commercial contracts. Below are our key tips and takeaways.

Do your contracts help you? Force majeure:

• Don’t assume that COVID-19 is automatically a force majeure event
• Always go to your relevant contracts (but a force majeure clause might not be called ‘force majeure’)
• Every force majeure clause is different and may not work in quite the way you expect
• Just because a contract is now unprofitable, this doesn’t typically mean force majeure can be triggered
• Don’t think that the courts will step in to fill any blanks or fix your force majeure clauses

What if force majeure can’t help? Frustration:

• If you don’t have a force majeure clause, your contract might have been frustrated, although bear in mind the bar for frustration is high
• Other legal options may be available to you, although these can be difficult to apply in practice: material adverse change (MAC) clauses, suspension/ termination clauses, illegality etc
• Some courts are still open although right now litigation is a step too far for many businesses

What should you do now? Be practical and pragmatic:

• Know your rights under your contracts but don’t let the ‘small print’ stop you thinking and acting creatively
• Prioritise key contracts and relationships
• This crisis will end, the businesses which get through it are talking to each other and finding solutions which are practical and pragmatic
• Use government support – there’s a lot out there (download our free Business support measures guide here)
• Don’t forget to make a record of what you decide and why, referring to external events (such as government guidance)
• Check your insurance

What about the public sector?

• Don’t presume that the public sector is taking a uncommercial approach: key guidance from the Cabinet Office focuses on being pragmatic so that at-risk suppliers ‘are in a position to resume normal contract delivery once the outbreak is over’: Procurement Policy Note – Supplier relief due to COVID-19 Action Note PPN 02/20 and accompanying FAQs

For more details, visit the coronavirus COVID-19 hub on the Shoosmiths website.