05 March 2021
‘Time of the essence’ and force majeure following the PM’s announcement
With the Prime Minister’s recent unveiling of the plan to end coronavirus restrictions in England, there has been a sense of optimism that many sectors of the economy will gradually be reopened by the summer. The plan includes various dates such as the reopening of schools on 8 March, outdoor mixing and sport opening on 29 March and non-essential retail and care opening on 12 April.
Whilst these dates help to provide a level of certainty over the next few months, businesses should proceed with caution and ensure they take practical steps to try and avoid any potential commercial disputes if there are any sudden changes in the coming months. Here are our top tips to try and avoid any potential disputes concerning your commercial contracts.
When time is of the essence
Suppliers should ensure both their existing and prospective contracts allow a certain degree of flexibility should there be any delays to performance. This is especially important for time-sensitive contracts where ‘time is of the essence’ for goods and/or services to be delivered or performed. Businesses could find themselves in a situation where a deadline is missed through no fault of the parties, and a dispute then arises as to who may be liable for resulting costs. If a clause refers to time being of the essence, the party expected to deliver goods and/or services should carry out a risk assessment, be aware of what is within their control should they face any disruption, and consider amending any contractual terms accordingly. This may include any standard terms and conditions either sent to customers or published on your website.
Force majeure clauses
It might be worth checking whether your commercial contracts include what is known as a ‘force majeure clause.’ If triggered by an unforeseeable event outside the reasonable control of the parties, such as a global pandemic, this type of clause is intended to suspend performance and / or exclude liability for certain legal obligations. It may also give guidance as to the allocation of risk generally and the ability of the parties to terminate the contract should there be a force majeure event. It is important to consider whether your existing contracts make sufficient allowances for this type of disruption.
Proactively work with your business partners and stakeholders
In light of recent developments, having an open and frank discussion with your business partners to ensure there is a certain amount of flexibility in your commercial contracts is an important practical step. Once any contingencies and/or contractual variations have been agreed, those changes should be formalised by an executed legal agreement.
Seeking legal advice at an early stage is often invaluable in understanding what can affect the performance of your contractual obligations, pressure testing the terms of a contract should something go wrong, and how to manage risk if and when something goes wrong. From legal advice to vaccines, prevention is always better than a cure.