Government measures in key jurisdictions 3rd edition final - Flipbook - Page 140
UnitedKingdom
Contractual
Issues
What measures
have been taken
to reinforce
contracts?
Property
•
As yet there has been no statutory Government intervention into the workings of UK contracts
between commercial entities and the normal rules apply. However, the Government is strongly
urging contracting parties to act fairly, reasonably and in the national interest when seeking to
enforce contractual rights and remedies, in an attempt to minimise the impact the coronavirus will
have on jobs and the wider economy. Legislation may follow to give teeth to this guidance.
•
In the UK there has been an increased focus on contractual small print, such as the precise wording
of force majeure clauses within contracts. The sort of unforeseen disruption to lives and businesses
that we are now seeing is exactly what one imagines a force majeure clause is designed to respond to.
In many cases the pandemic or the restrictions the Government has now advised to limit its spread
will fall into a contractual definition of force majeure, however the clause itself will need to be
scrutinised carefully in order to determine whether or not it is engaged.
•
If a force majeure clause is engaged, typically it will suspend the performance of the affected party’s
obligations under the contract,for the duration of the force majeure event.
•
If performance of a contract may be significantly affected it is crucial to review the terms of your
contracts so you understand your rights and obligations and to allow you to scenario-plan
accordingly. Contracts in the time of Covid-19: Force majeure and frustration
•
Particularly with long-standing contracting partners, many businesses are trying to agree a mutually
acceptable way forward, including varying contractual obligations and sharing the exposure more fairly
(in which case any variations should comply with the formalities required by the original contract).
•
Public sector bodies are being strongly encouraged by the Government to provide financial support to their
at-risk suppliers to increase the financial resilience of their supply chains.
•
The Government is fearful of a plethora of disputes that could arise as a result of the chaos caused
by the coronavirus crisis and is encouraging parties to resolve contractual disputes responsibility,
using alternative dispute resolution procedures where possible, before commencing formal litigation.
•
The Corporate Insolvency and Governance Act (discussed in the Insolvency section above) intends to
introduce a restriction on triggering ‘termination for insolvency’-type provisions in contracts as such
terminations may jeopardise attempts to rescue companies at risk of insolvency due to the current
crisis. The restrictions will only apply to suppliers who have contractual rights to terminate against
their customers. It does not apply to termination rights after an insolvency procedure has
commenced. There is also a temporary exemption for small suppliers (turnover below £10m).
•
Under emergency legislation:
– Landlords of business tenancies are prohibited from re-entering premises (forfeiture) for nonpayment of any sums due under the lease, from 26 March to 30 September inclusive. This period can
be extended by further legislation. Landlords will retain their right to exercise re-entry for these sums
at a later date, unless they expressly waive it in writing. Existing court orders for possession of
premises may bepostponed.
– Notice periods for terminating most residential tenancies are extended to three months, for
the period 26 March to 30 September. The notice period can be extended to a maximum of 6
months by further legislation.
Have any changes
been made to
the laws around
property, rent and
enforcement?
140
•
All current property possession claims are suspended until 23 August 2020. This suspension
affects all tenancies and licences of dwellings, as well as commercial property. Again, this
period can be extended.
•
Seizing goods to cover unpaid rent (known as Commercial Rent Arrears Recovery) is restricted
until 30 September so that it can only be used where 189 days’ rent is due and unpaid (increased
from 7 days’ rent in normal times).
Government measures in key jurisdictions