The impact of Coronavirus has meant that many retailers and other businesses have had to close their premises or are suffering a severe downturn in business. As a consequence some are refusing delivery or delaying payment.
Suppliers have been asking us for advice on how they can support their customers during this difficult time without giving up their legal rights.
If a customer fails to perform its obligations under the contract, for example it fails to make payment on time or refuses delivery, this will be a breach which will entitle the supplier to certain rights and remedies.
What these rights and remedies are will depend on the terms of the contract, but these may include the right to terminate the contract or a right to claim interest and damages (or both).
If the supplier takes too long deciding what to do or does nothing (either deliberately or accidentally) then the supplier may lose its right to take action against the customer for the breach. This is known as a “waiver of rights”.
A supplier may also be treated as having waived its rights if the customer demands an extension of time to pay or deliver goods and the supplier voluntarily agrees to this request.
Many contracts contain what is known as a “no waiver” clause, this is a clause which may read something like this:
“No failure or delay by either party to exercise any right or remedy provided under this agreement or by law shall constitute a waiver of that or any other right or remedy.”
The purpose of a “no waiver” clause is to preserve rights from being waived especially by a delay. However, this clause may not be effective if, after the contract has been formed, the business seeking to rely on it gives up its rights by its words or actions.
The customer’s failure to make payment on time or failure to accept delivery could (depending on what the contract says) allow the supplier to terminate the contract and claim interest and damages. However, if the supplier continues with the contract and fails to object to the breach, then its actions may be treated as a decision to affirm the contract and abandon the right to terminate and the supplier will not later be able to terminate the contract for that breach.
Further, if the supplier makes it clear, by its conduct or statement that it will accept a later deadline for payment or delivery and the customer relies on this, the supplier may be held to its promise and treated as having waived its rights to damages for the customer’s failure to meet the earlier deadline.
What should a supplier do if it wants to support its customers, but preserve its rights?
- Check the terms of your contract with the customer to see what your rights and remedies are for the breach
- Communicate to the customer in writing that your agreement to be flexible does not prevent you reserving your right to rely on the contract later
- The letter must make it clear how much extra time you are willing to provide and what the new deadline will be
- Do not delay. Whilst the law does not require you to snatch at a right to terminate, you should not wait too long
If you would like more advice and support on protecting your rights please contact Dorothy Agnew by email: email@example.com or Tel: 023 8071 8078
You can also find out more about how our commercial solicitors can help businesses.