Coronavirus affecting your supply chain?

Coronavirus — aka 2019 nCoV or Covid-19 to use its official title — is a human tragedy. The World Health Organization has declared it a public health emergency of international concern, the UK Foreign and Commonwealth Office is updating its travel advice on a regular basis and Public Health England predicts widespread transmission in the UK is highly likely.

Unsurprisingly, Covid-19 is impacting upon customer or supplier contractual obligations, including events which are taking place over the next few weeks or supplies of products which are being held up in affected areas. Here’s what you should be aware of:

  • Coronavirus / Covid-19 might be an event beyond your reasonable contract or an event of “force majeure” as us lawyers call it. Have a look at your contract to see if it contains this clause.
  • You might be able to unilaterally declare force majeure but you must be careful you don’t unwittingly breach the contract yourself. If the UK Government or other relevant authority declares a lock-down or prevents flights, then that’s an easier argument for force majeure.
  • Where there is force majeure, this will often allow a contracting party to delay the timing of complying with their contractual obligations without incurring liability. They should also take all reasonable steps to avoid or reduce the effects. It may also be possible to terminate the contract from that point.
  • “Restitution” may be available which seeks to prevent the unjust enrichment of a contracting party.
  • There are also other issues to take into account such as the duty to protect the health & safety of employees, civil unrest, business continuity planning and whether insurance cover will extend to losses incurred.
  • Finally, now that we know about Covid-19 and can anticipate and plan around the effects, it is arguably no longer an event beyond your reasonable control in respect of contracts that you are negotiating currently. You should provide for this in the contract, just as you should with Brexit.

Still have queries or concerns? Contact me: 020 7467 8742 frank.jennings@wallace.co.uk

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