What is the NHS coronavirus Test and Trace scheme and how does it work?

In the event that the contractor is displaying one or more of the above signs, then it is worth considering the following actions to protect the employer’s position as far as possible:

• Closely monitor the financial and on-site performance of the contractor in order to assess the likelihood and timing of potential insolvency
• Ensure all bonds, guarantees and collateral warranties have been obtained under the building contract, and if not take steps to obtain them immediately
• Consider the terms of any guarantees to ensure that the guarantor’s obligations are not inadvertently discharged
• Bonds may require adjudication to have been commenced (or even completed) prior to insolvency so as not to be stayed pursuant to insolvency laws
• Carry out an audit of the on-site plant, equipment and materials, and evidence this (for example with photographs and written records)
• Ensure that copies of all relevant documentation have been obtained, for example drawings, specifications and anything required to comply with CDM requirements. If not, take steps to obtain these
• Review the payment position under the building contract, including whether any over payments have been made to the contractor which should be reclaimed, what retention is held or has been released, whether any payment notices may be necessary, and whether there are rights of set-off which should be exercised
• Check whether the involvement of any third party is required, for example funders, landlords, tenants or purchasers who may have rights in relation to the building contract and how it is administered
• Review the terms of the building contract relating to contractor insolvency – hopefully the parties will be fully aware of the building contract terms and have been administering it correctly to date, but if it has been hiding in a draw then now would be a good time to dust it off and ensure familiarity with the relevant provisions!

In general. there is often a stick or twist decision.  If the employer chooses to financially support the contractor (for example by agreeing different payment arrangements), this may help to keep the contractor solvent and more likely to complete the project, but it also exposes the employer to greater risk if the approach is not successful.  Conversely, withholding payments  from the contractor may make insolvency a self-fulfilling prophecy.  The precise advantages and disadvantages of the approach will be dependent on the specific circumstances of each case.

There is not a magic number. It depends on the nature of the organisation, the work carried out, the organisational structure, the geographical spread, working patterns and conditions. We would give specific advice personalised to the organisation and taking all these and other factors in to consideration. There is no such things as too many MHFAs!

Hosted by NewcastleGateshead Initiative, Partners Damien Charlton and Jane Garvin discussed in this webinar contracts, managing supply chains and the role of directors, with  a particular focus on cancellation of events and businesses in the tourism and hospitality sector.

You can find a recording of the webinar from NGI here.

Some examples of the key questions to ask include:

• Is there still a viable underlying business that is likely to continue beyond the current crisis?
• What does the revised short to medium cash flow look like and will the company continue to be able to pay its liabilities?
• Does the company have the support of all of its stakeholders – lenders, shareholders, customers, suppliers and banks – even though the business might be in breach of its own obligations?
• What measures could (and should) the board put in place to protect creditors, including making sure that exposure to creditors (both collectively and individually) is not increased, assets are not sold at less than value and no creditor is treated more favourably than another?
• Is there still a reasonable prospect of the business avoiding liquidation or administration?

The key question is always whether accepting the money is in the best interests of creditors as a whole bearing in mind that accepting Government support and continuing to trade might increase the company’s overall liabilities. Directors should be mindful that if the business fails, their decisions during this critical time may be scrutinised and it is therefore important that directors have up-to-date financial information and projections to form the basis of any decisions, take stock, get the right advice and document the decisions that are taken.

The CMA sees only limited circumstances in which a full refund would not be given. The CMA accepts that where public health measures prevent a business from providing a service or the consumer from receiving it, the business may be able to deduct a contribution to the costs it has already incurred in relation to the specific contract in question.

This view reflects a relatively complex area of law under which parties are released from obligations under a contract if performance of that contract becomes impossible or illegal. This is called “frustration” of the contract. Under a law passed during World War II, a party to a contract that is frustrated who has incurred expenses is permitted, if the court thinks fit, to retain an amount up to the value of those expenses out of any money they have been paid by the other party.

The CMA’s view, however, is that this will not happen often, and that deductions from deposits will be limited.