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Covid-19 and Commercial Activities

Following the outbreak of Covid-19 across the globe, commercial activities are facing an unprecedented impact. Already facing huge challenges as the disease gained traction further east, many more have arisen as it continues to sweep its way the west.

Supply chains have already been interrupted, as movement of goods decreased rapidly from China and then became almost non existent as more countries were affected. Businesses across the world have scrambled as best they could, as imports dried up through factory output levels, travel restrictions, border closures and demand vastly exceeding the supply. Panic buying across the UK did not help the shortages and many stores stocks have gone.

So what can all businesses do to try and ensure contractual obligations keep going in a world where we are limited in so many ways? Commerce has become the supermarket once a week, with all unnecessary stores closed for the foreseeable future. Online sales are stalling in some areas, whist others such as Amazon and online supermarkets are working at high capacity to maintain orders.

Firstly, we recommend that you make contact with your suppliers at the earliest opportunity. Secondly ask them if performance can be deferred, waiving the associated penalties. 

In a world where governments are waiving taxes as commerce is hardly occurring, it is to be assumed that penalties must be scrapped to allow commerce to be able to begin efficiently when all lockdowns are lifted.

If this request is met with resistance, and the contract states that there are penalties for failing, look for a clause ‘Force Majeure’. This is interpreted in legal terms as an act of god.

An act of god is classed as an event that could not have been foreseen, and nothing could have been done to prevent it.

However, there are differences in approach, depending on the jurisdiction of the parties involved. UK law adheres to a common law approach, meaning there is no general definition, and the wording in the contract has to be examined.

If there is no clause, then Force Majeure will not apply.

Many countries in mainland Europe work with Force Majeure implied within, so no wording is required to specify it is taken into account.

When both parties are from different countries, issues may arise due to differences in wording or implication. Unfortunately there is no jurisdiction which is superior and it is best to make sure you have solid legal advice from a professional.

To prevent any worries surrounding Covid-19 and your commercial enterprise, please contact experts at Cartwright King here.

Issues may well arise where you have parties from different countries which use a different approach. There is no jurisdiction which is superior.

Dialogue between the parties  is the best advice anyone can give. If there is a clause, close scrutiny of the wording will have to be looked at. The same principles would apply to any insurance which a business may have taken out to cover such an event.

There is no doubt that this will be a testing time for businesses.  The hope is that a common sense approach will prevail as the problem is not limited to one jurisdiction but globally.

The Litigation team at Cartwright King are still working remotely, so if you need any further guidance, please contact Cartwright King here.

This information has been compiled by Lee Xavier, one of our legal experts in Commercial Litigation.


 

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