Bryon Rees
Partner | Legal
Guernsey
Partner
Guernsey
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These are unprecedented times with much uncertainty for businesses, particularly those in the supply chain sectors, such as logistics providers, manufacturers, providers of mechanical equipment and customer facing service providers. Whilst you cannot meticulously plan for the unforeseeable, you can be as prepared as possible for what may come.
Contract due diligence
- What is the governing law of the contract?
- What are the production / supply demands? Are there specific quantities and times for delivery?
- Does the contract contain service levels and prescribe penalties for non- or delayed- performance, such as service credits?
- Are there any mechanisms built into the contract to allow for renegotiation or variation of terms?
- Is there an express force majeure provision?
- What are the provisions concerning dispute resolution e.g. arbitration?
- Make sure key personnel know the triggers for commencement of the plan and understand their obligations.
Know your insurance cover
Dedicate a staff member or team to review your insurance policies. Such reviews should identify what type of loss they cover, the limits of any cover, and how to commence a claim. In particular, check for any coverage which may be applicable to COVID-19 situations, such as:
Unavoidable non-performance or under performance
If your business is unable to meet its contractual obligations, consider what measures can be taken.
Force Majeure
Practical steps to mitigate loss / damage
It is important to keep customers / suppliers abreast of performance issues. However, you may wish to seek legal advice in advance of such discussions.
Would it be reasonably possible to:
- Re-allocate staff and resources?
- Agree to vary or renegotiate contract terms with your counterparty? For example, could performance be delayed or rescheduled, prices varied, substitute or alternative products and materials used?
- Consider a compromise. Try to preserve future goodwill and relationships where possible.
Termination of contracts for breach
Make sure you understand the termination provisions under key contracts in respect of breach of contract, including material breach and persistent breach provisions, when they are triggered and the consequences of terminating the contract should you or the counterparty invoke the provisions.
Dispute resolution
It is possible that your commercial arrangements could turn contentious. Knowing the dispute resolution terms of your contracts is essential but seek legal advice early and start keeping good records today. Ensure problems with supply are noted in detail, alongside the events that have caused such problems (e.g. have government restrictions been imposed on transport or required labour reduction in the workplace and how has this directly impacted your ability to meet your obligations?).
Bryon Rees
Partner | Legal
Guernsey
Partner
Guernsey
Matthew Shaxson
Group Partner, Ogier Legal L.P. | Legal
Jersey
Group Partner, Ogier Legal L.P.
Jersey
Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.
This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.
Regulatory information can be found under Legal Notice
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