The government has recently issued guidance on responsible behaviour in the performance and enforcement of contracts which have been impacted by the Covid-19 pandemic.

The guidance note highlighted 5 principles business owners, companies and individuals should consider when entering, varying, or terminating contracts:

1. Acting responsibly
2. Acting fairly
3. Supporting the response to Covid-19
4. Protecting jobs
5. Protecting the economy

Although the guidance note is not designed to override legislative measures, support and relief available or your legal duties and obligations to third parties, it has nevertheless provided helpful courses of action you can take to ensure the stability of your business, the maintenance of your relationship and the encouragement of responsible and fair performance and enforcements of contracts during Covid-19.

As per the article on force majeure, businesses are encouraged to maintain their contractual obligations and, if that is not possible, find alternative options other than exercising the force majeure clause (if the contract contained one). Responding to your contracts in the above-mentioned way will be deemed reasonable and fair behaviour.

Reasonable and fair behaviour will therefore contribute to the following objectives to be met:

1. Maintaining contractual performance which is required to support the immediate response to Covid-19 to protect the public health, jobs, and the economy

This means trying your best to continue the daily operation of your business as best as possible; or finding alternative ways you can provide your customers with the service or product they require remotely.

2. Ensuring cash flow in those contracts is maintained, including to pay the workforce and individuals and businesses throughout the supply chain;

By continuing to enforce your contractual obligations, your business will be able to continue to financially thrive regardless of the current climate. This will enable businesses to pay their employees in full as opposed to the government’s capped furloughing scheme.

3. Where continued contractual performance is not possible or is not essential ensuring those contracts, supply chains and markets can be preserved during the public health emergency, by avoiding destructive disputes and insolvencies

Understandably many businesses may struggle to sustain their financial income which may incentivise them to engage in litigation to recuperate any losses incurred from third parties. However, it is prudent, now more than ever, that a cost – benefit analysis is conducted when chasing outstanding sums as well as the future relationship you may be damaging in engaging in contentious behaviour.

4. Ensuring that contractual and economic activity is preserved and will be ready to continue in a sustainable way

Failure to plan is planning to fail. By taking small steps now to engage with your customers and service users in preparation for future announcements by the Government, you will be in a better position to ensure your business returns back to normal.

To ensure the objectives above are met, we have compiled a list of tips you can use to ensure the continuation, reinstatement, or commencement of your business during and post Covid-19!

When dealing with customers, clients, stakeholders and third parties ensure you:

• Request and give relief for impaired performance with particular respect to:
  • the time for delivery and completion
  • the nature and scope of goods, works and services
  • the making of payments
  • the operation of payment and performance mechanisms
• Request and allow extension of time
• Substitute or find alternative modes of performance and compensation; and
• Include compensation for increased cost or additional performance
• Make and respond to:
  • force majeure
  • frustration
  • change in law
  • relief event
  • delay event
  • compensation event and
  • excusing cause claims
• return deposits and part payments
• exercise remedies in respect of impaired performance
• claim breach of contract and enforce events of default and termination
• make and respond to requests for information and data under the contract
• give notices, keep records, and provide reports under the contract
• make and respond to requests for contract changes and variations
• make and respond to requests for consents
• commence and continue formal dispute resolution procedures if necessary
• request and respond to requests for mediation
• enforce judgments if necessary

By acting responsibly and fairly, considering the above in light of contracts, you will ensure fair and equitable outcomes are achieved.

For further advice on how you can ensure the maintenance or reinstatement of your business, contact one of our Solicitors for a free 30-minute consultation.