April - May Mag Issue 25 Paperturn - Page 17



The specific wording of the force majeure
clause and the particular circumstances
relating to the performance of the contract
will need to be examined to determine
whether you may claim any reliefs under
force majeure.
party looking to defend themselves against
a claim for breach of contract, may want to
explore whether frustration is applicable to
the particular contract.
The force majeure clause in my contract
requires a certain amount of notice in
We are a removals company. Can we rely order to rely on it – should I serve it on
on a force majeure clause if we are unable my counterparty “just in case”?
to perform the removal services due to
Covid-19?
This depends what the effect of the notice
is and the risk/benefit of giving that notice.
Removals services are covered under the
Once you serve the notice you cannot unConsumer Rights Act 2015 (CRA) and terms serve it.
governing when services must be performed
will generally form part of the contract.
For example, if you serve notice on your
supplier “just in case”, this might allow the
The CRA provides remedies for breach
supplier to end the contract because they
of these terms and therefore a removals
found it unprofitable or for other reasons
company may be able to limit, but cannot
unconnected with the force majeure event.
exclude, its liability for such a breach.
It may then prove impossible to bring in
Any contract terms which attempt to prevent an alternative supplier, due to the extent
or discourage a customer from exercising
of the Covid-19 pandemic, and therefore
their statutory rights are also void.
great consideration must be given to
consequences before invoking any force
However, it is likely that that a provision
majeure clause.
which seeks to limit the company’s liability for
delays caused by circumstances outside its
In the absence of a force majeure clause,
control would be acceptable under the CRA. if the contract is frustrated, must the nonperforming party pay damages?
The CMA Unfair Terms Guidance states that
clauses excluding liability for delay are more If a party fails to perform their obligations
likely to be regarded as fair and thus to be
under the party, but the impact of Covid-19
enforceable where:
does not lead to frustration of the contract,
the other party may entitled to claim
• They are restricted in scope to delays
damages for breach of contract.
unavoidably caused by factors beyond the
company’s control.
If frustration is established, as discussed
• The company takes reasonable steps to
above, the Law Reform (Frustrated
prevent or minimise delay.
Contracts) Act 1943, allows recovery of
• If there is a risk of substantial delay, the
monies paid under the contract before it was
customer is given a penalty-free right to
discharged, subject to an allowance, at the
terminate.
court’s discretion, for expenses incurred by
the other party.
Generally good communication with
the customer throughout the removals
However, Section 2 of the 1943 Act excludes
process should minimise upset when the
contracts for carriage of goods by sea, the
circumstances are clearly beyond the
sale of specific goods, insurance contracts,
removals company’s control due to Covid-19. and certain charter parties, but regardless of
whether the 1943 Act does apply, there may
If there is no force majeure clause will I
also be a common law action against the
be in breach of contract if I am no longer non-performing party for unjust enrichment if
able to perform under it?
they are able to benefit from a contract when
they haven’t performed their obligations.
Again, this will depend on the terms of
the particular contract. If the obligation to
Can we suspend performance of a
perform is absolute, then a failure to perform contract, or agree with the other party to
according to its terms can be a breach, even abandon the contract if Covid-19 make its
if the party is not morally to blame.
too hard or expensive to perform?
Fault is not a requirement for breach,
unless the contract says it is. If the failure to
perform is a breach, it will normally give the
other party the right to claim damages, and
possibly also the right to terminate.
In the absence of a force majeure clause, a
In the absence of an express contractual
term to suspend the performance of a
contract, there is no general right to do so but
the affected party could approach the other
party to request a contract variation.
If this consent to suspend isn’t given and
the contract isn’t frustrated, by stopping
performance the affected party is in breach of
the contract and this may trigger termination
rights for the non-defaulting party and
possible recovery of loss and damages.
Contracting parties can end a contract
by agreeing to abandon it. However, this
agreement will need to be well documented
to ensure there has been offer and
acceptance of this agreement.
If performance of a contract becomes more
difficult or expensive the party who fails to
perform is in breach and must pay damages.
Even if abandoning the contract is not yet a
breach (because no obligations are currently
due), it could repudiate the contract. The
other party could then accept the repudiation,
end the contract, and claim damages for all
its loss caused by the termination.
Can the parties vary the contract or
renegotiate its terms?
Yes. And this is often the best way to
proceed, if possible.
If parties do agree to vary or renegotiate
the terms of their contract, they should
comply with any relevant requirements of the
contract, such as recording any variation in
writing, and carefully consider the long term
impact of any proposed changes to deal with
the immediate situation projects are currently
facing. Accurate record keeping is essential.
The parties should consider whether
changing one aspect of their arrangement
has a knock-on effect on other provisions,
such as:
- Payment provisions.
- Whether contractual insurance
requirements require amendment and
whether the parties have the relevant
insurance cover to comply with those
obligations.
- Whether the changes they agree are in
any way time limited, so that they apply
only for a limited period.
- Whether the changes need to be reflected
elsewhere in the contract chain (either
down, to subcontractors and suppliers or
up, to funders and customers).
Backhouse Jones can provide a full review
of relevant key clauses and suggest
amendments tailored to your business and
commercial situation for a fixed fee. Please
contact their corporate team at corporate@
backhouses.co.uk for more information.
17

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