Commercial contracts in a post-Covid world

If you had asked most business owners in the UK what event was likely to most impact their contracts at the start of 2020, I expect most would have said Brexit.

The impact of the then yet to be named Covid-19 disease spreading from the Far East would probably have been well down the list of concerns.

However, most have felt the effect of government attempts to control it. A couple of areas in particular have come into focus – force majeure and electronic signatures.

Force Majeure

Once again, easily overlooked force majeure clauses have been particularly important. To allow a party to suspend performance of its obligations under a contract a force majeure clause must be present in a contract, and wide enough in scope.

In his 2020 documentary ‘Extinction: The Facts’, David Attenborough warned that humanity will face growing numbers of pandemics as a result of loss of biodiversity.

If that is the case then businesses must always consider how their ability to perform their obligations in contracts could be affected by the kind of disruption experienced in 2020, bearing in mind that a future pandemic could be far more serious and most insurers have acted to exclude pandemic cover from the protection afforded by their business interruption policies.

Electronic Signatures

Video meetings became the norm as we adapted to the pandemic. Alongside that businesses increasingly adopted virtual signing as a means of completing contracts.

The Law Society issued timely guidance in 2019 confirming that electronic signature of documents including deeds is valid.

Nonetheless, certain formalities must be observed or parties will risk creating a nonbinding document. Worse than finding out that a force majeure clause is inadequate or has unintended consequences would be finding that a whole contract doesn’t exist as a result of defective signature.

Whether a contract needs to be drafted up or advice is required on particular aspects such as force majeure or methods of signature, professional advice should always be sought.

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