As the business upheaval of Coronavirus increases day by day, we have been approached for advice by a growing number of clients and contacts as to whether they (or another party) have legal grounds to end or suspend a contract in a bid to reduce expenditure. Accordingly, we hope that the following pointers will be helpful:
- Check the termination terms carefully – is there an express right to terminate early or for convenience?
- Retention of title clause – if you have supplied goods and not been paid check to see whether you can terminate and take back possession of the goods.
- Follow the termination procedure to the letter – otherwise you may be the party in breach, liable for damages.
- If terminating, clearly set out the grounds for doing so in writing.
- Force Majeure – is there a clause and, if so, does Coronavirus come within its definition?
- Impossibility of performance – if the virus (or any other matter) makes performance of the contract impossible or radically different from what was envisaged, the contract may have terminated automatically releasing each party from future obligations.
- Don’t delay in taking action when you are entitled to do so – if not, there is a danger that any later actions may be seen as waiving termination rights.
- Making concessions to the other party – if you want to do so by giving more time to perform or pay that is fine, but ensure that any variations to the contract are recorded in writing and that it is clear when the extension ends and performance is due.
In addition to the above guidance, please see links below:
- Detailed guidance on the impact of Coronavirus on commercial contracts – https://knowledge.mooreblatch.com/blog/coronavirus-how-safe-is-your-supply-chain
- General guidance on the legal impact of Coronavirus on your business – https://knowledge.mooreblatch.com/en-gb/coronavirus-mitigating-the-impact-on-your-business
If you need any additional advice or support on the above please contact: