Enforcing commercial contracts as we emerge from lockdown…
There has been a huge amount of commentary on the impact of Covid-19 on commercial contracts since the outset of lockdown including discussions in relation to the application and enforcement of force majeure clauses and the frustration of contracts.
As lockdown restrictions are eased and businesses open up again boards need to consider whether the performance of contracts which were previously suspended due to force majeure must be resumed. If this does not happen the other party is likely to consider what options it has in relation to enforcement of the contract or even possibly termination.
In May the Cabinet Office issued Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency.
This new guidance sets out guidance and recommendations for responsible and fair contractual behaviour in the current climate in an attempt to avoid potential disputes and business should have regard to this. The guidance stresses that good contractual behaviour is important both for jobs and for economic recovery.
So what is meant by fair and responsible contractual behaviour?
- Being reasonable and proportionate in responding to issues relating to contractual performance and enforcing contracts; and
- Acting in a spirit of cooperation with a view to achieving a practical, just and equitable outcome having regard to the impact on the other party, the availability of financial resources, the protection of public health and the national interest.
The government is strongly encouraging parties to seek to resolve disputes responsibly through the use of negotiation, mediation and other alternative dispute resolution strategies.
This guidance is not law but parties to a contract must consider the impact of the guidance when disputes arise and consideration should be given to how to move forwards. It is not clear at this stage if the courts will take into account whether or not parties have taken the guidance into account but the guidance should be seen as a commercial deterrent to unreasonable behaviour.
For further information about the guidance… talk to Tollers on 01604 258558 and speak to the contracts specialists in our commercial contracts or dispute resolution teams, who will be happy to assist.