The current extraordinary situation caused by the Covid-19 pandemic has resulted in many business people reaching to their contracts. Is there a get out clause? If not, can you get out anyway?
Under English law, parties are bound by a contract they are a party to. As a general rule they must perform their obligations under that contract. If one party fails to fulfil its obligations, it could face liability to its counter party for breach.
Here are a number of issues people are currently grappling with:
- Getting paid
Make sure you keep on top of outstanding payments. If you agree to delayed payments, make sure you are not deemed to have waived your contractual rights.
- Suspending payment/ performance obligations
Have a conversation ASAP if you can’t perform/ need more time.
- What are your duties to mitigate loss if you are not the one in breach?
- Terminating contracts
Are you actually entitled to terminate? Make sure you’re not guilty of wrongful termination that might trigger a big counterclaim against you.
- Fffforce Majeure clauses
Do you have one? If so, can its wording protect your business from being liable for failure to perform? A tricky question given no one had probably heard of or thought about Covid-19 when the clause was drafted.
- Ffffrustration (Legal term as well as possible state of mind!)
If there’s no force majeure clause you may be left to the mercy of the English common law principle of frustration.
- Supervening illegality
Can you say you can’t perform because the government has passed a law, making performance illegal? Keep abreast of the news updates on this.
If you can’t negotiate a solution how about using online or telephone mediation? Appointing an independent neutral such as myself to
facilitate the negotiation can achieve results. It’s quick to set up, can achieve a result in a matter of hours, and much cheaper than going to court. There’s no need to have issued proceedings / instructed solicitors.