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BUSINESS DISRUPTED SUPPLY CHAINS
CORONAVIRUS
A SURVIVAL GUIDE
As Covid-19 continues to force the world into isolation, Printweek looks at the
key issues for management and offers advice on how to deal with the fallout
Coronavirus has proven how small our
world is and, at the same time, just how
reliant we are on others for everything we
need. From food, medication and cash to
workers, transport and power, individuals
and businesses in a modern society
cannot operate in splendid isolation.
And print has not been exempted from
the fallout. Drupa, scheduled for June this year, has been
pushed back to April 2021. And as Printweek has already
reported, print is still working but with precautionary
measures in place.
In this three-panel special feature, Adam Bernstein
examines three key issues for management and finds advice
on how to mitigate the impact of coronavirus.
Removing risk from contracts
John Warchus, a partner at Moore
Blatch, has seen coronavirus
increase concerns over the ability
of parties to carry out agreed contracts.
In particular, he says that
“the coronavirus outbreak is an
illustration of the legal principles
of force majeure and frustration
and how contracts can be suspended
Printweek April & May 2020
or ended because of an
exceptional outside event”.
Both are powerful concepts, but Warchus says they operate
quite differently. The first thing to note is that under
English law, force majeure only applies where there is an
express clause in a contract. “In essence,” he says, “a party
relying on it will need to demonstrate that a force majeure
event has occurred which is beyond its reasonable control;
that the event has prevented, hindered or delayed the performance
of the contract; and it has taken all reasonable
steps to avoid or mitigate the force majeure event.”
This means looking to the wording of the contract and
understanding that where coronavirus is accepted as a
qualifying force majeure event, contractual obligations will
only be lifted for as long as the event remains in place.
Warchus knows from experience that “the courts will interpret
any clause strictly and the burden of proof will be on
the party claiming force majeure to demonstrate that it has
arisen and is the sole cause of delay or non-performance”.
He adds that “if force majeure is one of several reasons, it
will not apply”. And this must be demonstrable. Further,
and this should be obvious, force majeure must be notified
according to the contract terms for it to apply.
As to the legal effects of force majeure, Warchus says the
wording is key, but generally liability is removed for as long
as the event remains in place – “the effect is only temporary,
and the affected party will need to resume their obligations
as soon as the force majeure event has passed”.
At the same time, Warchus points out that a well-drafted
force majeure clause will have a provision that allows the
contract to be terminated without liability if the force
majeure continues in place for a defined period: “Such a
clause ensures that the party not affected is not tied into a
very long contract where the other party cannot perform its
obligations for a significant time.”
The coronavirus outbreak is an
illustration of the legal principles of
force majeure and frustration and how
contracts can be ended” John Warchus Moore Blatch
But what if there is no force majeure clause? Here
Warchus says that then the only way an affected party can
avoid legal liability is through the legal concept of frustration
which, he says, “requires them to show that it is either
physically or commercially impossible to perform a contract
due to an interrupting event”.
The problem is that legal test for frustration is far stricter
than that for force majeure as it requires a party to show
that it is impossible to perform a contract or that the obligations
have become radically different. The legal effects are,
according to Warchus, dramatic as frustration can automatically
terminate a contract for good.
Case law here is muddied and the courts in recent years
have, reckons Warchus, said that obligations need to
become “radically different” after the event for frustration
to apply.
Lastly, Warchus explains that to determine if a contract
has been frustrated, a court will have to assess the terms of
the contract; the factual background to the contract; the
parties’ knowledge and expectations about risk; and the
parties’ view as to the ability to perform the contract in circumstances
that are now said to amount to frustration.
Words Adam Bernstein