We are all seeing an awful lot of blog posts, articles and other releases about coronavirus at the moment. A lot of words have been used to cover some very important public health and financial messages, both for individuals and businesses. This post is looking at coronavirus from a different perspective – the reviews that every business should be carrying out on their contractual position.
Most businesses have contracts in two directions – with suppliers, and with customers. In each case, there is a likelihood that coronavirus is likely to impact on one or both parties’ ability to meet their contractual obligations. I suspect that an awful lot of people have been crossing their fingers and hoping that their force majeure clause covers them. In a lot of cases, there is bad news ahead.
Many people treat force majeure clauses as “boilerplate” clauses – in other words, things that need to go in at the end of a contract, but aren’t really worth spending time reviewing or considering. This can lead to a number of problems, the most common being either (i) an unclear definition of force majeure; or (ii) a lack of clarity about what happens if force majeure occurs. Either can leave businesses in serious difficulty – for example, if a force majeure clause only allows a hospitality business to terminate rather than suspend the contract, then they are going to be in serious cashflow difficulties with terminations (and returns of deposits) over the next few months.
The second port of call is insurance. Some businesses have one form or another of Business Interruption or Business Continuity insurance. In some cases, an assumption has been made that such insurance will automatically kick in if or when the government measures prevent a business from operating. This is often not the case. I have reviewed several insurance policies for clients in the last week or two on this point, and in the vast majority of cases the business interruption cover only kicks in where the cause of the interruption is a specific insured event (flood, fire and so forth). Most do not cover disease or pandemic. You need to be clear about what your policy does and doesn’t cover.
I am offering a fixed fee review service in respect of coronavirus business planning. I will review your main supplier/customer contracts, and applicable insurance policy, and advise you as to your position and suggested areas for improvement. In some cases, there will be nothing that you can change – if your insurance doesn’t cover coronavirus, you will not be able to change that now I suspect. However, in respect of your contractual arrangements, you can make a move to protect yourself both now and in the future – the implication seems to be that even if things get “back to normal” in the summer, there is at least some risk of a coronavirus resurgence later in 2020. There is also the important point that, even if the review gives you negative news, it is important for your business planning to have a true picture of your situation.
I am charging a fixed fee of £750 plus VAT for this review service, whether to existing or new clients. Please call or email me, Euan McLaughlin - Commercial Partner on the details below if you are interested in taking advantage of this service.