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Contractual performance issues

Issues to consider in relation to commercial contracts as lockdown eases.

The roadmap out of lockdown gives us reason to be optimistic, but the serious impact of a year of Government restrictions will make many businesses understandably cautious. For most businesses, now is the time to focus on how to ensure that they are in the best possible position to operate in an uncertain post lockdown economy. 

In our experience, many businesses were fairly swift last year 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 multiple periods of restrictions over the course of more than a year have left the economy in a fragile condition.

In such circumstances, it is important for businesses to review their contracts as they plan to recommence operations in a post lockdown world. It will be necessary to consider the legal implications of any action taken or contemplated to preserve contracts and business relationships and be alive to the potential consequences of action threatened or taken by other contracting parties. The actual or perceived  amenable approach taken by some during the pressure of the lockdown period may quickly evaporate 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 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 during lockdown 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 a contract was 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? If the contract is terminated, do you need to follow these clauses to resolve the dispute?  
    • You can find the guide here

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

We have created an initiative called “LS Unlock” to help businesses access legal advice during the uncertain times ahead. LS Unlock comprises a free initial assessment of significant commercial claims together with a menu of alternative fee arrangements which can reduce and, in certain cases, eliminate the upfront cost of pursuing a claim. 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 help them survive the effects of the Covid-19 crisis.

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