BUSINESSES are being urged to cast an expert legal eye over the content of client contracts, as well as their own insurance cover, to ensure they are fully protected from any potential disruption caused by COVID-19, a new coronavirus.
The outbreak of the deadly infection in China, and the rapid way it is extending its reach to other parts of the world, including here in Yorkshire and the wider UK, poses a different and significant challenge for many businesses.
The scale and speed of the spread of COVID-19 has prompted the World Health Organisation into taking the rare step of declaring the situation a Public Health Emergency of International Concern.
As fears about its potential impact on trade gather pace, those in the manufacturing, logistics, travel and tourism and education sectors are deemed to be among those most at risk of financial exposure – which losses already estimated to be running into many billions of Pounds across the world.
So, to ensure the highest level of preparedness for all eventualities, now is the time to examine the legal detail of your client agreements – and plan head for any far-reaching consequences.
This will confirm – or not – whether you are liable for any breaches of contract should your organisation be affected by the virus and, as a direct result, be unable to fulfil contract obligations.
In particular, whether you are a provider or receiver of goods and services, you need to focus on whether delayed performance, or contract termination is permitted.
By way of reassurance, an epidemic such as COVID-19 is usually covered in force majeure clauses which tend to be designed into most contracts, and offer all the necessary protection against any liability and compensation claims. But not always.
Where it is explicit in such clauses, a party is deemed not liable if it can prove that any non-performance was due to an impediment beyond its control; and that it could not reasonable be expected to have taken it into account when the contract was signed, or to have avoided or overcome it.
Yet, as with many major contracts, especially those with an international dimension, the content can be complex and the devil very much found by poring over the detail, so an expert view is very much required.
It’s a similar story with a company’s own insurance policy and the extent to which it covers business interruption. While some large multi-national firms buy specific cover for communicable diseases, an increasing number of mainstream policies exclude such outbreaks in a bid to keep premiums low.
Global insurers typically cover risks such as earthquakes and plane crashes nut have retreated from being exposed to other risks, including health-related, to avoid mounting losses.
Previous viruses, such as SARS, Ebola and Zika, also prompted insurers to be more cautious, adding specific virus exclusions to a majority of basic protection policies – and COVID-19 would be among these.
Without adequate cover, many businesses run the real risk of having to absorb financial losses from any disruption themselves.
Should you have any questions or concerns regarding contract law and client agreements, please do not hesitate to contact this article’s author, trainee solicitor Nathan Watts, a member of our Corporate and Commercial teams here at Milners, on 0113 245 0852, 01423 530103 or email us at hello@milnerslaw.