Skip to main content

Contractual performance issues

Issues to consider in relation to commercial contracts to survive the Covid-19 restrictions and plan for the future.

The Government enforced restrictions have had a huge impact on the commercial world; premises are empty, work forces are operating remotely or on furlough and the demand for most services has fallen through the floor. For most businesses, now is the time to focus on how to survive a potentially sustained period of restrictions followed by a period of economic uncertainty to ensure that they are in the best possible position to continue to operate when we emerge from the Covid-19 crisis.

In our experience, many businesses were fairly swift in recognising immediate short-term contractual problems and assessing the various Government Schemes designed to assist businesses. Many also took practical steps to try and mitigate the immediate financial impact of being forced either to close or to dramatically alter their normal operations. But the effects of the restrictions will be long lasting and will clearly leave the economy in a fragile condition.

In such circumstances, it is increasingly important for businesses to review their long-term commercial contracts.To survive, it will be necessary to consider the legal implications of any action contemplated to preserve contracts and business relationships and be alive to the potential consequences of action threatened or taken by other contracting parties. The approach taken by others may also change as restrictions begin to be lifted. Those who may have adopted an amenable approach during the pressure of lockdown may become less understanding as we return to some sort of normality. All this is fertile ground for potential disputes.

We have produced a number of guides on key issues that we anticipate businesses should be considering in the coming months. 
The topics we will cover are:

  • Contract variation
    • To survive lockdown you agreed to vary your contract. But is it binding? Did you meet the legal requirements? Did you comply with the terms of the contract you were trying to amend?
    • You can find this guide here
  • Duress and undue influence
    • Did you improperly force the other contracting party to accept amendments to your contract? What are implications of such action?
    • You can find this guide here
  • Waiver and estoppel
    • Even if not formally agreed, was something proposed by one party which caused the other to act in a particular way? Can a party just walk away from what they proposed? Have rights under the contract been waived by some action or inaction by the party seeking to rely on those rights
    • You can find this guide here
  • Repudiation
    • If the contract has been breached during lockdown, can the contract be terminated? If it wasn’t terminated during lockdown, can that breach be the basis for terminating the contract as lockdown restrictions are lifted?
    • You can find the guide here
  • Specific performance
    • Can you be compelled to perform your obligations under a contract? Can you compel the other party to perform?
    • You can find the guide here
  • Dispute resolution clauses 
    • If your contract includes a series of steps to be taken to resolve disputes, can you ignore those steps because they are inconvenient during or after lockdown? If the contract is terminated, do you need to follow these clauses to resolve the dispute?  
    • You can find the guide here

These practical guides will be published over the next few weeks on the LS website and released on the usual social media platforms. You will also find them linked below.

If you have specific queries, please do not hesitate to contact a member of our Dispute Resolution team  

We have also created an initiative called “LS Unlock”  to help businesses access legal advice during these difficult times. This initiative has been designed specifically to assist clients in this uncertain economic climate and is part of our commitment to working with clients to survive the Covid-19 crisis.

To read the full guide on Contractual Performance issues,download the guide here.

Related items

Contract breaking up is never easy

Do dispute resolution clauses have immunity from Covid-19?

08 June 2020

The economic impact of Covid-19 on businesses is profound. Government restrictions, supply chain and logistics challenges, cash-flow pressures and employment issues are all affecting the ability of businesses to comply with contractual obligations. Such instability and uncertainty is likely to result in an increase in disputes.

Contract breaking up is never easy

Will a court force a party to perform its contractual obligations?

01 June 2020

A combination of government-imposed restrictions, a down-turn in trade and a scarcity of funds has meant that parties are increasingly finding themselves unable to comply with their contractual obligations. The usual remedy in such a scenario would be for the innocent party to sue the defaulting party for the loss and damage suffered as a result of the other party’s failure to fulfil its obligations.

Contract breaking up is never easy

Can a contract be terminated if COVID-19 or government sanctions prevent performance?

26 May 2020

The COVID-19 pandemic has had a significant impact on businesses worldwide. Lockdown restrictions, disruption to supply chains, increased pressure on cashflow and reduced capacity have all affected the ability of businesses to fulfil contractual obligations. Many will find themselves in a position where either they or the counterparty will be unable to perform their obligations and will be in breach of contract.

Contract breaking up is never easy

But you promised! Even without a written contract, promises can be enforced and rights given up.

19 May 2020

Broken promises in commercial life can leave businesses in real difficulties. That feels particularly unfair when a party’s only mistake was to take the other at its word. Which is why in the normal course of things businesses should have written contracts to remove risk and uncertainty.

Contract breaking up is never easy

Under pressure: what kind of pressure makes a contract unenforceable?

13 May 2020

We live in incredibly challenging times. Ongoing government restrictions, and the wider economic impact of the COVID-19 pandemic, have made the performance of many commercial contracts very difficult, if not impossible. As a result, some parties may seek to avoid their obligations altogether, whilst others may seek to amend them.

Contract breaking up is never easy

Are contract amendments agreed during lockdown legally binding?

06 May 2020

Performing obligations in commercial contracts during the Government enforced lockdown is a challenge. Sometimes that challenge is so great that it is the catalyst for the breakdown of a business relationship. To avoid remaining bound by onerous obligations parties have felt compelled to terminate some contracts.

Covid 19 - Coronavirus

Our advice on responding to the coronavirus outbreak.

Back To Top