For many small businesses, the strain on their cash flow from COVID-19 is really beginning to bite.
As a result, a growing number of businesses are looking for advice as to whether they legal grounds to end or suspend a contract in a bid to reduce expenditure.
Our colleague, John Warchus of Moore Blatch solicitors, has provided some valuable pointers on the:
- 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 advice, Moore Blatch have created a knowledge centre which gives detailed guidance on the impact of COVID-19 on commercial contracts at https://knowledge.mooreblatch.com/blog/coronavirus-how-safe-is-your-supply-chain and more general guidance on the legal impact of COVID-19 on your business at https://knowledge.mooreblatch.com/en-gb/coronavirus-mitigating-the-impact-on-your-business
If you need any specific advice or support on these matters, John would be pleased to speak with you in confidence on a non-obligation basis. He can be contacted either my email at firstname.lastname@example.org or by phone on 020 8332 8631.