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Covid-19 – Corporate and Commercial Agreements

Covid-19 – Corporate and Commercial Agreements
April 23, 2020 Robbie Kenney

Businessman stopping dominos from fallingCovid-19 has undoubtedly had a profound impact on the business world and will continue to factor into business decisions for the foreseeable future. Whether that be the stay at home guidance changing the way businesses work on a day to day basis, or changes in the supply chain as a result of Covid-19. Given the unprecedented circumstances we now all find ourselves in, it is essential that businesses plan for the future with Covid-19 in mind.

Force Majeure Clauses

Force majeure clauses are often included in many commercial contracts and if you are currently a party to a contract which may already include one of these provisions, please see an article prepared by Lauren Smith who is a Solicitor in our Commercial Litigation Department (https://enochevans.co.uk/covid-19-commercial-contracts/). Given the current Covid-19 crisis, force majeure clauses should be at the forefront for parties entering into any corporate or commercial contract.

Force majeure clauses are designed to protect the parties in relation to their liability and/or obligations under a contract should extraordinary circumstances outside of their control prevent them from being able to perform the contract. Covid-19, at the very least, has highlighted the need to ensure that new commercial contracts provide for a future outbreak of a similar kind. Force majeure clauses are interpreted on the basis on which they are drafted, which is why it is key to ensure that force majeure clauses are correctly drafted from the outset.

When drafting force majeure clauses, there are various elements of the clause to consider. Firstly, the types of events that will be covered by the clause need to be considered. Pandemics such as Covid-19 are not always expressly included, however given what is currently happening, the inclusion of pandemics and the associated consequences should be considered moving forward. What happens in the event of a force majeure event occurring should also be included and there are various options for this depending on what the parties agree upon. These are all matters that need careful drafting during the negotiation process.

One of the key aspects of force majeure clauses that must be considered is the foreseeability of force majeure events. Depending on the wording of the contract, force majeure clauses often apply to those events that are not in the reasonable consideration of the parties at the time the contract is entered into. Given how widespread Covid-19 now is, it is unlikely that the suggestion it was not considered by the parties to contracts currently being negotiated would be accepted. Therefore, for new contracts being drafted, provisions to deal with Covid-19 should be negotiated between the parties and drafted appropriately. Force majeure clauses that protect against any future pandemics or unexpected consequences of the current pandemic should also be a large part of the negotiation.

The Corporate and Commercial team at Enoch Evans LLP can assist you and your business with drafting and reviewing commercial contracts to ensure that they provide adequate protection before they are entered into.

It is not only contracts that should be considered in light of Covid-19; carefully drafted Terms of Business can provide greater protection in the event of future events such as Covid-19. Not only will Terms of Business that incorporate protection for such events provide an extra layer of protection, they will provide a consistent level of protection to give your business some peace of mind. Enoch Evans LLP have a team who are experienced in reviewing and drafting Terms of Business, so whether Robbie Kenney, Trainee Solicitor, Corporate & Commercial, Enoch Evans LLPyour business has existing Terms of Business that require reviewing and updating or needs a whole new set of Terms of Business drafting, we can assist whatever your needs.