Tips on handling contractual issues caused by Coronavirus.

Tips on handling contractual issues caused by Coronavirus

The coronavirus outbreak and restrictions put in place to combat it, have meant that it is impossible to proceed with events resulting in widespread cancellations. There is also an impact on the ability of businesses to perform contractual obligations, for example, if there is a temporary disruption to sourcing materials.

The legal position will depend on various factors and a more in depth view on the contractual position is set out in the following articles Contracts and Coronavirus - What are your rights? and Covid-19's impact on supply chains: what should you look out for in your contracts?

In the current circumstances, in most cases neither party is to blame for the cancellation or inability to perform the contract. You may be able to preserve long term business relationships and your reputation by looking at practical solutions rather than just focussing on the strict legal position.

Gordon Simpson, Director in our Dispute Resolution team, shares some helpful tips on how you might deal with the situation.

Before you communicate with the other party, check any terms and conditions to understand what was agreed and your rights and obligations.
Look out in particular for any clauses that deal with cancellation or termination. Consider whether you want to enforce your strict legal rights in the circumstances.
Look out for a Force Majeure clause or exclusion clause which may impact on the legal position.
Be careful not to waive any of your rights or openly admit to any breach of your obligations. This is to protect your position if a compromise cannot be achieved.
Communication with the other party is really important. It is not just what you say but how you say it. Where no-one is to blame, listen and empathise with the other party’s situation. This may help when exploring solutions.
Use ‘Without Prejudice’ communications. To avoid any doubt, you should start the conversation by expressing it to be ‘Without Prejudice.’ This is really helpful to enable both parties to protect their legal position and explore a resolution. Parties are usually more open with each other and collaborative in a without prejudice conversation.
Is there a compromise available such as delaying performance or part performance to limit disruption with slight variations?
Hopefully the disruption caused by COVID-19 will be short-lived whereas Court proceedings can be lengthy, costly and a distraction from your business.
Often your instincts are right about the best way forward but take time to make the right decision for your business, particularly in these unprecedented circumstances. Don’t be pressured into a decision before you have considered your options.
Take the opportunity to talk through the problem with a colleague or professional to get a second opinion or independent perspective.

These are difficult and uncertain times which are putting business owners and decision makers under extreme pressure. Businesses are also having to keep on top of the government’s revision of guidance and legislation in light of COVID-19. If you need help or just a second opinion please get in touch with a member of our team who would be happy to talk through your issue and offer guidance.

The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.

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