You will still be bound by the terms of contracts you have entered in to before this global emergency started. Terminating contracts needs careful preparation at times like these.
There are however reasons you can look to bring a contractual relationship to an end and where you are in a bit of a fix during these difficult times, the circumstances may give parties a way out.
What can you do?
Even though there may be an excuse, excuses do not of themselves mean a breach is ‘ok’ or should be ignored. COVID-19 is quite a good excuse, or reason at least, but a good reason is not necessarily a basis to bring end a contract.
Where breaches are major, bringing a contract to an end is one approach we have been managing for a number of clients.
Think about what the other party has done, or has not done and what terms they are required to comply with, but have recently (or historically, at a pinch) failed to.
Leases are a common document we are being asked to advise on, and they are harder to bring to an end without a really good reason. We discuss frustration below, but where – because of COVID-19 or otherwise – there has been a major breach (probably not a lack of cleaning for example, but perhaps a lack of access should you still need it), this should be seriously considered.
Where a contract has a clause dealing with events that are entirely out of anyone’s control, it is usually under the heading ‘Force Majeure’. The idea is to contractually decide what will happen if something drastic and well out of your control happens.
The result will vary depending on the clause, and the contract needs to be considered carefully. Usually there is either a delay/postponement, or the contract comes to an end.
Can you imply Force Majeure terms in to a contract, if there isn’t a clause already? Terms that were obviously in the parties’ intention at the time of signing can be considered implied. It clearly would be sensible to have the clause in, and now more useful than ever.
“Frustration” is the term used for a situation where a contract can no longer be ‘actioned’ or complied with because of an event outside of the control of either party.
If something, like a global pandemic, occurs and affects a contract to the extent the contract is no longer viable, you can call the contract ‘frustrated’, ie neither party can do anything, and through no fault of their own.
If this happens, either party can claim ‘frustration’ and bring the contract to an end – and not via the termination clause in the contract; it just comes to an end.
This is important because, where successfully claimed, you can avoid notice periods.
The circumstances need to be extreme. COVID-19 is extreme – Our advice has been to consider frustration.
You never know… although you have probably already checked: There may be a clause allowing you to terminate with relative ease! Read the contract first, and see what you can do using the actual terms you agreed in the first place.
It may not be a guaranteed win if you terminate on any or some of these bases. You need to think commercially.
Negotiating in these difficult times is the first thing to do: People do not want to lose clients or relationships, and you might find them being helpful rather than breaking up a good thing.
A commercial resolution is always the best. Try to end on a good note: It is cheapest and you will have the better outcome.
We have managed a number of these scenarios for clients already and, coupled with a strong commercial approach to negotiations, we have successfully provided support .
Every case needs to be considered on its merits and every matter needs detailed advice: These are designed to function only in extreme circumstances, and will not be easily agreed by the other party, or perhaps not agreed by a Court.
We are always happy to help. Contact Us for more information.