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Are your contracts fit for purpose in this new world of business?

If you are one of the thousands of business owners in the UK who have had to adapt during the past couple of months to survive the coronavirus pandemic, then it is likely that some of your contractual arrangements may not have kept pace with all the changes you have made.

‘While this is understandable’, says Jeremy Redfern, Partner and Head of the Commercial department at QualitySolicitors Parkinson Wright,  ‘as we begin to adjust to a new way of life and of doing business, it is important to take stock of the way things are now having to be done and to ensure that your current practices and contracts remain aligned.’

Review recently agreed arrangements

The best place to start is by reviewing the contracts you have put in place since the pandemic took hold.  Ideally there should be a written agreement on file for every contract that has been agreed and which has been signed off by all of those involved.  Where an arrangement has slipped through the net, efforts should be made to document the contract as soon possible and preferably with the help of a solicitor who can advise on any potential legal issues.  

Two types of contract in particular are worthy of close scrutiny.

Third party provider contracts

The first are contracts under which a third party provider has been appointed to carry out certain functions on your behalf, such as effecting deliveries to customers or carrying out risk assessments for public facing staff and where, to perform those functions, they require access to personal data held by your business and which is covered by the Data Protection Act.

In these circumstances, it is possible that you be obliged to confirm the terms of the deal you have struck in a written document, and also certain key things prescribed by law, including:

  • the data the third party will have access to;
  • the length of time for which the contract will run;
  • the purpose for which supplied data can be used;
  • the steps the third party will take to ensure the data remains secure;
  • the third party’s agreement to subject employees to a duty of confidence;
  • the third party’s agreement not to subcontract services without your consent; and
  • the third party’s agreement to return or destroy data as soon as the contract ends.

Online and telesales agreements

Online and telesales contracts also require careful consideration, particularly where you have never used these mediums to effect sales before and your contracts are therefore unlikely to take account of distance selling rules.  These include the Consumer Contracts Regulations 2013 which, in the context of the sale of goods to members of the public for example, require you to:

provide certain pre-contract information, including your business name, a description of the goods to be sold, the price to be paid (including taxes), arrangements for delivery, when substitute goods may be supplied and when an order can be cancelled;
confirm the pre-contract information in a durable form as soon as a sale is agreed, together with details of guarantees and after sales service, the procedure by which cancellation can be effected and your geographic location in the event of complaint;
ensure cancellation rights can usually be exercised up to 14 days after delivery has taken place, with a model form provided to make the process as easy as possible; and
ensure the right to a refund in most cases where cancellation occurs and which must be paid as soon as possible and generally within 14 days of the goods being returned.

In many cases you will also need to comply with the E-Commerce Regulations 2002 and with specific VAT and reporting rules where you plan to sell into the EU.

Review temporary concessions on longstanding agreements

Once your newest contracts have been reviewed, the next step should be to revisit existing contracts in respect of which temporary pandemic-related amendments or concessions were agreed when the initial lockdown restrictions were first imposed.

Your focus in reviewing these agreements should be to determine whether the temporary arrangements remain appropriate and, if not, whether they should be lifted or subject to revision.

In undertaking a review, we strongly suggest that you seek legal advice on your position particularly where a contract is of operational or strategic value. 

Among the things you will need to think about are: 

  • why particular forbearance or concessions were sought;
  • whether the problems they were intended to overcome have materialised;
  • how your business has adapted and evolved since the crisis began;
  • the impact social distancing is having on the way you operate;
  • whether temporary contract variations of any sort remain necessary; and
  • whether it would be better for existing concessions to continue or for new arrangements to be agreed.

When considering your position, bear in mind that we are still in a state of flux and that while the direction of travel at the moment looks goods, there is still the possibility that things could change.  

Wherever possible, it is usually a good idea to try to maintain advantageous concession arrangements for as long as possible and where permissible to agree enhancements where you feel this would be helpful. 

Futureproof all of your contracts

The final step is to review any other contracts you have in place to determine whether these, too, may need amending to help you cope in the new business environment.  If they do need amending, then you should consider seeking a temporary variation of your contractual obligations in much the same way as you have already done with your key contracts.

Alternatively, you could suggest the insertion of a permanent new general pandemic clause into your contracts which will automatically set in motion a series of measures whenever performance of contractual obligations becomes difficult for pandemic related reasons, whether that be COVID-19 or some other future global health crisis.

You should also consider whether it might be appropriate to look at trying to renegotiate existing health and safety provisions to cater for social distancing measures remaining in place long term, or indeed being reintroduced in the event we get hit by a second wave of the virus or possibly a different pandemic with equally devastating social and economic consequences.

For further information or advice on how to conduct your own coronavirus contract review, please contact Jeremy Redfern or a member of our commercial team.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

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