Government measures in key jurisdictions 5th edition - Flipbook - Page 158
UnitedKingdom
Contractual
Issues
What measures
have been taken
to reinforce
contracts?
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The Government has been reluctant to intervene into the workings of UK contracts
between commercial entities and the normal rules apply. The Government is still
strongly urging contracting parties to act fairly, reasonably and in the national interest
when seeking to enforce contractual rights and remedies, in an attempt to minimise
the impact the coronavirus will have on jobs and the wider economy.
In the UK the focus on contractual small print continues, such as the precise wording
of force majeure clauses within contracts. The sort of unforeseen disruption to lives
and businesses that we are now seeing is exactly what one imagines a force majeure
clause is designed to respond to. In many cases the pandemic or the resulting
restrictions and guidelines issued by the Government to limit its spread will fall into a
contractual definition of force majeure, however the clause itself will need to be
scrutinised carefully in order to determine whether or not it is engaged.
If a force majeure clause is engaged, typically it will suspend the performance of the
affected party’s obligations under the contract, for the duration of the force majeure event.
Sometimes, it can also provide a right of termination.
If performance of a contract may be significantly affected it is crucial to review
the terms of your contracts so you understand your rights and obligations and to allow
you to scenario-plan accordingly.
Our article published last year sets out the finer details and analysis of force majeure
clauses, and these still apply one year on: Contracts in the time of Covid-19: Force
majeure and frustration.
Particularly with long-standing contracting partners, many businesses are trying
to agree a mutually acceptable way forward, including varying contractual
obligations and sharing the exposure more fairly (in which case any variations should
comply with the formalities required by the original contract).
Public sector bodies are being strongly encouraged by the Government to provide
financial support to their at-risk suppliers to increase the financial resilience of their supply
chains. The Government is fearful of a plethora of disputes that could arise as a result
of the chaos caused by the coronavirus crisis and is encouraging parties to resolve
contractual disputes responsibility, using alternative dispute resolution
procedures where possible, before commencing formal litigation.
The Government is fearful of a plethora of disputes that could arise as a result of the
chaos caused by the coronavirus crisis and is encouraging parties to resolve
contractual disputes responsibility, using alternative dispute resolution procedures
where possible, before commencing formal litigation.
The Corporate Insolvency and Governance Act (discussed in the Insolvency section
above) came into force at the end of June 2020. It introduced a restriction on triggering
‘termination for insolvency’-type provisions in contracts as such terminations may
jeopardise attempts to rescue companies at risk of insolvency due to the current crisis.
The restrictions will only apply to suppliers who have contractual rights to terminate
against their customers. It does not apply to termination rights after an insolvency
procedure has commenced. There is also a temporary exemption for small suppliers.
Now that the UK is no longer in the EU, and with the transition period having ended on
31 December 2020, data protection clauses may need to be updated (e.g. from the EU
GDPR to the UK GDPR – or both regimes could apply). In addition, following the
‘Schrems II’ judgment and as the UK awaits its impending adequacy decision, data
transfers to and from the UK may require careful consideration and/or variations to
contracts.
Generally, we have seen an evident move to ‘future-proof’ commercial contracts. There
has been an increase in specific ‘Covid-19 clauses’, cancellation clauses and greater
negotiations around termination rights (particularly in the events industry and for
contracts regarding the provision of time sensitive goods or services). It is hoped that
these provisions will help rather than hinder enforceability in the event that the parties’
obligations under the contracts are impacted by the pandemic.
Government measures in key jurisdictions
