Contracts and business agreements in the time of Covid

The government has invested an unprecedented amount of public money into the Treasury to shore up the country not just once but again as we head into a second lockdowns. However, the reality is that some business casualties like Laura Ashley and Debenhams may have had their day and Covid did not cause their demise. This vicious and unprecedented pandemic will be the cause of some ailing (and some not so ailing) firms to fail, but it will also bring opportunities to other more resilient and nimble businesses and their investors. Some may even argue that, although there will inevitably be further tough times ahead, the culling of some business fat is not an altogether bad thing. 

But what of the contracts and business agreements that are worth saving, which are currently limping along, struggling with the harsh realities of Covid?  How can they be helped for the benefit of all?

The Cabinet Office guidance on 7 May this year encouraged reasonable behaviour in contracting. Some businesses looked at this guidance and sought to contact their business partners, customers and suppliers alike, to renegotiate terms. Of course, some took advantage of it to try and avoid obligations. Others genuinely hoped that early transparent conversations with business partners could reach commercial solutions that lawyers would not be able to achieve in or out of court and certainly not in the same time span or cost. The property world for example has had its fair share of casualties with tenant-friendly commentaries suggesting all tenants, residential and commercial, should be let off payment obligations whilst they are out of work or not trading. However, not all landlords are the greedy Rachmans of our day.  Options to waive rent have serious consequences for others depending on that money. If you are a pension fund landlord your collections could be paying the pension for a miner in Wales. If you are a charity with property rentals needed to help fund good works, your options to release tenants from obligations are limited. 

The business world is, and will always be a tough place. Innovative businesses will no doubt take advantage of this volatile economic climate. At the same time some will have reflected on past behaviours and, having seen many genuinely affected by this time of lockdown, hopefully will act more reasonably and treat others fairly. 

The use of Facilitation Contract Renegotiation (FCR) just launched by the London Chamber of Arbitration and Mediation (LCAM) allows business to have safe conversions early, aided by skilled facilitators, to reach pragmatic compromises and avoid disputes. This is timely when Covid is causing impossible choices for businesses worldwide. The legal rights and wrongs under the contract mean little while economic factors weigh more heavily on business. Renegotiation is an urgent necessity for both sides and does not need a discussion over who is at fault. Such early safe conversions can avoid a dispute altogether, something the courts are very keen to promote at the moment.

For enquiries about LCAM services, please visit www.lcam.org.uk or contact LCAM Manager, Farad Asghari on 02072031946 or by email info@lcam.org.uk.

By Jane Player, London Chamber of Arbitration and Mediation Mediator

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