Law firm Shoosmiths has provided some topical advice on coronavirus. Partners Fiona Teague and Jonathan Smart discuss the issues below.
The coronavirus outbreak and developments over the past few weeks gives rise to a number of pressing commercial and practical issues for businesses in the Thames Valley, Solent and across the south in respect of supply chains, people, banking and finance arrangements and the ability to continue business as usual internationally or otherwise.
Force majeure clauses in business-critical contracts are coming into sharp focus at the moment, as coronavirus continues to sweep the globe and the extent of the impact on global supply chains is becoming increasingly apparent.
Many businesses in our region are concerned about potential disruption as a result of the coronavirus outbreak are reviewing their key contractual arrangements to understand potential contractual implications. Businesses must decide whether urgent actions to mitigate exposure are needed - such as avoiding performance of obligations or exiting the contract - and whether changes to existing business continuity plans are required.
It is worth considering whether the coronavirus outbreak could trigger the application of the force majeure clause in a contract - where it contains such a clause - meaning that a party may not be liable for a resulting failure to perform its contractual obligations. There is no standard definition of a force majeure event under English law, meaning that it is up to the parties to a contract to define the sorts of events which will trigger any force majeure provisions and to set out what the specific legal consequences of the clause being triggered will be.
When considering whether the coronavirus outbreak itself constitutes a force majeure event under a contract, thought should be given to various factors including the following:
Practical steps and considerations:
When reviewing a contract for the purpose of understanding the impact of an outbreak of coronavirus on the parties’ obligations and possible mitigating actions available, the force majeure provisions are not the only contractual provisions to consider. Look also at change control or variation provisions - which may govern how the parties can agree to amend or unilaterally amend a contract - as well as termination and suspension provisions. There is no substitute for a full contract review with an understanding of what the key objective of the review is intended to be in mind.
The coronavirus outbreak and developments over the last few weeks gives rise to a number of pressing commercial and practical issues for businesses in respect of its supply chains, people, banking and finance arrangements and the ability to continue to trade internationally or otherwise in the usual course of business.
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