Terms & Conditions, disputes and risk: The Impact of Covid-19

While many parties to commercial arrangements sought to suspend/terminate their obligations under existing agreements (e.g. by claiming Force Majeure), as businesses begin to re-open, they will need to consider how robust their T&Cs have proven to be during the crisis and what changes might be needed to provide greater protection for them in the future.

By taking the time to appropriately allocate risk and understand the implications of different terms and conditions at the outset, parties to commercial contracts will be able to have more control over how their potential exposure is managed. Early communication and possible amendments to terms and conditions prior to contract formation can be  very important. This will give all parties the opportunity to provide clarity on what is viable and also help to avoid a dispute further down the line.

Will we see disputes at board level?

Many Directors and shareholders will be feeling the strain caused by the uncertainty of lockdown and the significant change to our working environment.

Directors have duties to promote the success of the company and exercise a reasonable level of care, skill and diligence. There is inevitably a degree of mistrust when you cannot see or measure what your fellow business partners are doing to stabilise, protect and drive the business forward. It appears that a lack of visibility is set to continue for the short term for some.. This could all lead to costly and damaging disputes internally.

There should be concern about challenges by shareholders, wrongful trading claims, director’s disqualification proceedings and insolvency, so it is about knowing your duties, acting accordingly, taking professional advice from legal, financial and/or insolvency specialists where necessary, and evidencing any meetings and decisions to ensure the reasonable decisions are made and recorded to minise the risk of successful challenge

Payment of outstanding invoices

Cash is king. Make note of any outstanding invoices and build this into your cash flow forecast. In addition, conduct your research and examine your terms and conditions with each supplier. If you are unable to make a payment that is due, communicate with creditors and agree on deferred payment or a payment plan where possible.

There are a number of initiatives available to businesses during this time, for example: HMRC runs a scheme that allows eligible businesses more time to pay when tax arrears have built up. Do your research, find out what is available.

For further guidance, please do not hesitate to contact our expert team by clicking here.