Businesses- are you acting fairly and reasonably towards your own customers?
17 MAY 2020
Many of our readers would have found themselves in a position where they had a need to review their contractual obligations due to the impact of Covid-19 on their ability to pay or carry on with the contract.
In our experience, we have found that some businesses have been very supportive and understanding of our clients’ position. However, we also came across some who acted unreasonably.
The Government has published some guidance on responsible contractual behaviour in the performance and enforcement of contractual obligations impacted by the COVID-19 emergency. Responsible and fair behaviour in contracts now will result in better long-term outcomes for jobs and our economy.
What does this mean for businesses?
Businesses are strongly encouraged responsible and fair performance and enforcement of contracts during this public health emergency.
Who and how does it apply?
- It applies to individuals, businesses and public authorities;
- It applies to all existing contracts which are materially impacted by COVID-19. It is not clear in the guidance what materially impacted means in practice. We therefore encourage parties to adopt a reasonable approach;
- It is not clear whether it is intended to apply to all English law governed contracts irrespective of the parties’ nationalities.
What is reasonable?
Contracting parties are encouraged to act responsibly and fairly in their performance and enforcement of contracts during the UK’s response to the pandemic. Businesses should aim at resolving their contractual disagreements outside of formal dispute resolution proceedings, i.e. Courts.
It is not expressly defined what constitutes responsible and fair behaviour. The guidance says the following:
Some examples of situations in which fair and reasonable behaviour is strongly encouraged is provided in the guidance, including:
- Requesting, and giving, relief for impaired performance, including in respect of the time for delivery and completion, the nature and scope of goods, works and services, the making of payments and the operation of payment and performance mechanisms;
- Requesting, and allowing, extensions of time, substitute or alternative performance and compensation, including compensation for increased cost or additional performance;
- Returning deposits or part payments;
- Making, and responding to, requests for contract changes and variations;
- Exercising remedies in respect of impaired performance, including enforcement of security, forfeiture or repossession of property, calling of bonds or guarantees or the initiation or continuation of insolvency or winding up (or equivalent) proceedings;
- Requesting, and making, payment under the contract;
- Claiming breaches of contract and exercising termination provisions; and
- Making and responding to force majeure, frustration, and change in law claims.
Is it helpful?
Unfortunately, the guidance is not legally binding on the parties. The purpose of the guidance is to simply encourage responsible and fair contractual behaviour in light of COVID-19. The guidance does not affect the legal rights of parties under the contract law. For this reason, the guidance does not restrict those who choose to enforce their rights through Courts.
Contracting parties are encouraged take up mediation and to negotiate out of Court settlements by inviting parties “
It seems that, the guidance does not take precedence over any relief that is already available to the parties under the contract in question. For example, force majeure provisions or the Government’s response to COVID-19 by way of loans and grants.
The guidance signals behaviours which are expected by the UK Government of businesses, by using the language of the Government strongly encouraging parties to comply for their collective benefit and for the long-term benefit of the UK economy.
The Government will continue to review behaviours in contracting, including public sector procurement, performance, prompt payment and contract management arrangements, as we emerge from this public health emergency to ensure that contractual arrangements can function effectively and maximise their contribution to jobs and the economy. The will be reviewed on or before 30 June 2020.
It remains to be seen how this broad request to act fairly and responsibly will impact on the Judicial reasoning if and when parties do decide to resort to Court proceedings in resolving their contractual disputes.
Read our future publications
We intend to cover another relevant issue of how Covid-19 will impact on the assessment of damages in Court proceedings in our next article.
We are open for business as usual. For more guidance please get in touch with our team on email@example.com
Yulia BarnesManaging Partner
Yulia Barnes is our Managing Partner. She is an experienced solicitor and advises on a wide range of contentious and non-contentious matters for both private and corporate clients.Yulia started her legal career at a large international Magic Circle firm. She then became a partner at a regional law firm and headed a Dispute Resolution Department. She then moved in-house before starting her own Boutique practice, Barnes Law, with the aim of providing exclusive services to high net-worth individuals and privately-owned businesses. More details can be found on her LinkedIn profile.
Expertise Yulia and her team are widely recognised for their professional and practical approach to matters. She is committed to ensuring that her clients’ objectives are achieved in the most cost-effective way possible.
Approach Yulia has a wealth of experience working with businesses of all sizes: from large multinational corporations to start-ups. She has particular expertise in a hospitality industry, investment funds, private and corporate clients, and focuses on startups and technology-driven companies. Yulia brings the same level of attention to detail, professionalism and a personal touch to every case and client, and truly immerses herself in her clients’ businesses. She prides herself on her problem-solving, commercially astute approach and her track record of partnering with clients to help them achieve their strategic objectives.
Will joined Barnes Law as an Associate Solicitor in Spring 2023, shortly after qualifying in September 2022.
Will works mostly on real estate and corporate/commercial matters. Will enjoys providing advice on transactional matters.
Away from the office, Will can be found reading or playing golf. While he played rugby until university, and rowed throughout his degree, he now tends to watch both from the sidelines. During the winter he can also be found skiing.
Will plans to continue developing his legal skills and experience at Barnes Law, under the expertise and guidance provided by Yulia.
Mark is an experienced solicitor whose practice areas include intellectual property (IP), IT, data protection and general commercial law.
Mark advises businesses of all sizes – from sole traders to corporations. Among his clients are: clothing and lifestyle brands, restaurants and food suppliers, IT companies, banks, hedge funds and venture capital firms, education providers, medical and pharmaceutical brands.
Outside of his practice, Mark also advises members of the Institute of Directors as part of its Directors’ Advisory Service.
- Prosecuting a UK trademark application on behalf of an education provider and representing them in related UK IPO opposition and revocation proceedings;
- Advising a publisher and a delivery business on data protection matters, B2B and B2C Ts & Cs of sale, website and app Ts & Cs, all aspects of global brand protection;
- Advising footwear brands, alternative asset managers and hedge funds on their global brand protection, including overcoming various refusals, representing them in opposition proceedings and settlement negotiations;
- Representing a central bank in opposition proceedings before the UK IPO;
- Advising a lifestyle brand concerning trademark clearance and protection, negotiations for a website/app development and maintenance agreement.
Ioulia TatawatFamily Law Adviser
Ioulia has a solid background in family law and offers guidance, clarity, and support to clients during one of their most challenging times in their life.
She advises on all three pillars of separation: divorce, children matters and financial settlements. Ioulia is a member of Resolution and is keen to try to settle matters at early stages.
Ioulia is dedicated to assisting clients and navigating them through their legal matters with clarity and support.
Alex joined Barnes Law in September 2023 after finishing his master’s degree in law. Prior to joining Barnes Law, Alex worked in property litigation at Ashfords. Alex assists Yulia on a variety of both contentious and non-contentious matters.
Outside of the office, Alex enjoys reading and hiking. Prior to working in law, Alex was a competitive tennis player.
Alex continues to develop his skills in legal practice under Yulia’s guidance, he plans to sit the Solicitor’s Qualifying Exams (SQE) in 2024.
Mehves joined Barnes Law in August 2023, right after graduating from Queen Mary, University of London (LLB Senior Status). As part of her qualification journey, Mehves is currently pursuing her Legal Practice Course (‘LPC’) at the University of Law. She also holds a degree in European Union Law from Maastricht University, Netherlands.
Mehves works closely with Yulia on a variety of contentions matters and also writes Barnes Law’s legal blogs, manages social media accounts and is responsible for marketing.
Outside of work and studies, she enjoys running, tennis and yoga.
Mehves is looking forward to developing her legal skills at Barnes Law.
Julia PodgornovaInvestor Relationship Manager
Julia guides clients in making important business decisions based on comprehensive risk assessment and strategy. She supports investors in devising strategies designed to maximise each business’s potential from pre-seed to IPO.
Julia’s particular area of expertise are IT start-ups at different stages. Julia supports business through their fund-raising journey. As an Investor Relations Manager, Julia communicates with investors to facilitate a smooth round and legal part of each transaction.
In her free time Julia enjoys sailing, ballroom dancing, art exhibitions and travel.