New guidance: Government guidance urges businesses to take account of COVID-19 when considering their contractual rights and obligations
The new guidance ‘Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency’ strongly encourages parties to contracts that are materially affected by COVID-19 to ‘act responsibly and fairly in the national interest in performing and enforcing their contracts’ by following its recommendations.
This update was published in Legal Alert - June 2020
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Acting responsibly and fairly includes ‘being reasonable and proportionate in responding to performance issues and enforcing contracts (including dealing with any disputes), acting in a spirit of co-operation and aiming to achieve practical, just and equitable contractual outcomes having regard to the impact on the other party (or parties), the availability of financial resources, the protection of public health and the national interest’.
This applies, for example, where a party asks for relief for ‘impaired performance’ in relation to issues such as late delivery or completion, the nature/scope of goods or services delivered, payment, claiming breaches and exercising remedies such as termination.
The guidance urges parties to seek fair and equitable outcomes and recommends alternative dispute resolution rather than litigation where the parties cannot resolve matters between themselves.
While the government guidance has no legal force, note that two former Supreme Court judges, together with academics, have issued a paper recently suggesting how the courts could deviate from the strict common law principles when considering contractual disputes arising because of COVID-19, on grounds these amount to exceptional circumstances.
Parties to contracts may wish to take legal advice if the government guidance (and the associated legal points in the judges’ paper) may enable them to negotiate more effectively with the ‘other side’ if a contractual problem arises.
- View the government guidance on responsible contractual behaviour and the Supreme Court judges’ paper online.
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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