Coronavirus, the superior force

The lockdown means workers can’t travel, non-essential shops are shut and staff are being furloughed.

Is this force majeure?

I’ve been giving much advice on an obscure clause in customer and supplier contracts. “Force majeure” — superior force in English — provisions are often over-looked clauses at the end of the contract. But now all my clients are asking about it. If government-imposed restrictions prevent performance under a contract, can they rely upon force majeure to suspend obligations without incurring liability?

Well, it depends, of course. There is no general concept of “force majeure” under English law. So you must check your contract. If you don’t have this provision in your contract, your failure to comply with the contract might mean you are in breach. Or, you might be able to rely upon the doctrine of “frustration” to show the lockdown has frustrated the purpose of the contract. Don’t forget that, now that we know about Covid-19 and can plan ahead, force majeure won’t apply to new contracts you negotiate. You should provide for this in the contract, just as you should with Brexit.

Will insurance cover help?

The Association of British Insurers has warned that most businesses don’t have insurance to cover them for losses caused by the lockdown. Standard business interruption insurance typically covers physical damage but not forced closure by governments. So your insurance policy probably won’t cover you.

Can you terminate?

If things are really bad, maybe you can terminate your contracts. There’s no point in continuing to pay for goods or services that you can’t use or resell. So check your termination clause. Can you end the contract early for force majeure or for convenience? How much notice must you give?

Business continuity

By now, you’ve engaged your business continuity plan. This might have been the first time that you have had to use it for real. Take a minute to ensure you’ve bought enough remote access licences and server / compute resource and that you can scale up quickly. Software asset management doesn’t stop just because human movement does. Software proprietors will enforce their rights even especially if there is a lockdown.

Personal data

Normal rules apply about use of personal data, even more so with staff working remotely. So make sure your staff comply with your IT and data security policies in the normal manner and protect information. Are they printing documents at home or sending messages to their personal email addresses. Also, think about where the personal data is being stored, especially if your IT supplier is based outside the EU. Have you transferred the data in accordance with GDPR? If not, the ICO may fine you.

What now?

Get your lawyer to advise on your existing contract to see where you stand. And for new contracts, you should be factoring all of this in.

If you need advice, contact me or +44 (0) 20 7611 2338.

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