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Covid-19: Fulfilling commercial contracts

19th March 2020

Covid-19: Fulfilling commercial contracts

Factors including a lack of supplies or materials, a severely depleted workforce or even a requirement to switch production, to manufacture urgently required items rather than your normal output, are all issues that can affect your ability to deliver on a contract.

Whatever the cause, a failure to meet contractual obligations may leave you liable for the payment of someone else’s losses or another contracting party may be liable to meet your losses. Even if the cause is out of your control, the terms of the contract will determine what liabilities you or another contracting party has, and crucially what protection the contract offers.

Often protection for parties comes in the form of a force majeure clause, a provision that allows a party to suspend its obligations whilst specified circumstances beyond their control persist.  The majority of contracts contain a force majeure clause, but you should check that it does so and is worded to offer you the best protection.

You should also check that your liability under your customer contracts is suitably limited and that the liabilities you do have are covered by insurance where this is obtainable. Also ensure that your contracts contain retention of title provisions providing you with an element of security over your products in the event of non-payment, but even where there may be issues in this regard, we can help you to mitigate the risks of potential unlimited liability.

You should also look at whether your contracts allow you to pass on cost increases e.g. where you are affected by price changes in your supply chain or exchange rate fluctuations.  These are more likely in the current environment.

There is also the ‘back to back’ issue to consider where you could end up liable to your customers for their failures but without a claim against them. You should be reviewing your supply contracts as well as those with your customers, for example to ensure that you have sufficient financial and practical recourse in the event of non-fulfilment by your contracting party. 

Overall the robustness of your contracts will be vital and previously largely ignored terms may well come in to focus, but our team are ready to advise you in real time on any contracting arrangements.

If you would like to discuss any of these issues in more detail, you can contact

Peter Manford on 07860 565972 or peter.manford@higgsandsons.co.uk

Julia Lowe on 07912 121805 or julia.lowe@higgsandsons.co.uk

If you have any other general queries or concerns that you feel we can assist with then please email supportingyou@higgsandsons.co.uk and somebody will get back to you as a matter of urgency.

 

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Email: law@higgsandsons.co.uk
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