The ongoing situation surrounding COVID-19 is causing a strain on businesses of all sizes across all sectors. Jeremy Parkin, Partner in the Commercial Contracts team at Wilkes highlights some key points that businesses should be aware of.
Are your customers trying to cancel orders due to the COVID-19 pandemic?
You need to look at the terms of your contract with them and see whether there are cancellation rights and, if so, whether you can charge for cancellation.
Do you need to cancel orders with suppliers? What will this cost your business?
Again, you need to look at the terms of your contract with them and see whether there are cancellation rights and, if so, whether you can be charged for cancellation.
Are you prevented from performing your obligations under contracts with customers or suppliers?
There may be “Force Majeure” provisions in the contract which protect you from claims and even entitle you to cancel the contract or order.
Put simply a “Force Majeure” is a provision in a contract that excuses a party from performing its contractual obligations if that becomes impossible or impracticable due to circumstances beyond their reasonable control.
Are any of your suppliers trying to excuse non-performance on the grounds of COVID-19?
They may have a “Force Majeure” defence in the contract, but is the pandemic really preventing them from delivering or are they trying to get out of the contract?
Do you or any of your customers or suppliers need to vary the existing contract to help cashflow or address the new circumstances due to COVID-19?
Contract variations need to be carefully drafted to make sure they capture the commercial terms, deal with what happens when things return to “normal” and that they are enforceable.
Remember you always need to check whose terms and conditions apply to the contract or look at any signed agreement with your customer or supplier.
Our Commercial Contracts Team can review and advise on all of these issues, guide you through the contractual matrix and help protect your business. Please contact Jeremy Parkin – firstname.lastname@example.org – or Helen Smart – email@example.com.