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What will be the impact of the proposals on suppliers?

The change in the law has the potential to place much greater financial risks on suppliers, making it more difficult to exit a contract with a customer of doubtful solvency.  This will place increased emphasis on appropriate financial due diligence and credit checking before entering into supply contracts.

In addition to the obvious issues around financial risk, suppliers will also need to think carefully about how their contracts are drafted.  For example, any form of right that is drafted so as to be triggered on customer insolvency will clearly be problematic.  These could include:

  • Retention of Title provisions, which are commonly drafted so that the right to enter premises and retake possession of the goods is triggered on insolvency;
  • Provisions for brand protection, which seek to control how goods are dealt with on termination of the contract.

This is potentially a very significant development for many businesses.  We would strongly recommend specialist advice be obtained so that:

  • businesses understand the potential increased risks faced; and
  • where possible, contracts are updated so that appropriate protections are maintained.

Related FAQs

Are Public Bodies able to continue to pay contractors (and their supply chains) at risk as a result of Covid-19?

Yes: The Cabinet Office has published a number of Procurement Policy Notes to provide instructions to Public Bodies to enable payments to continue to be made to at risk suppliers (and their supply chains) who have been affected by Covid-19. Copies of this guidance can be obtained from the Government website at: https://www.gov.uk/government/publications/procurement-policy-note-0220-supplier-relief-due-to-covid-19

Last updated on 8th April, 2020

What about office holders?

Office holders who provide services under an intermediary (such as a service company consultancy agreement) and whose services relate to the office held, would fall under the IR35 regime and must be assessed accordingly.

Last updated on 4th February, 2021

What if you want to terminate the contract completely?

If changed circumstances mean that a business wants to exit from a contractual arrangement, then before trying to terminate it, a careful review should be carried out to see whether a right to terminate actually exists. For example:

  • Not every contract for the sale of goods contains the right for the buyer to terminate in circumstances where the supplier hasn’t done anything wrong. If a business has entered into a contract on the supplier’s standard terms, it is unlikely to contain any such provision
  • A contract for the provision of services is unlikely, if drafted by the customer, to contain a provision that allows the supplier to walk away from the arrangement at short notice, or perhaps at all

If a party tries to terminate a contract when it doesn’t have the right to do so, the other party will likely claim breach of contract and could sue for damages. In the case of a long term or high-value contract, this could amount to a very significant liability.

Even if the right to terminate the contract does exist, there might be particular rules about the following:

  • How much notice has to be given
  • How such notice has to be served (for example, it might have to be in writing to a particular address)
  • When the notice can be served (perhaps on an anniversary of the start of the contract)
  • How much a party has to pay if it cancels (for example, for raw materials, for work done to date, or even the whole contract price)

All of these factors must be taken into account, and any contractual processes for termination are followed.

Last updated on 7th May, 2020

What is the guidance in relation to the Mental Capacity Act 2005 and Deprivation of Liberty Safeguards during the Covid-19 pandemic?

The Department of Health & Social Care has published guidance for hospitals, care homes and supervisory bodies on the Mental Capacity Act 2005 (MCA) and Deprivation of Liberty Safeguards (DoLS) during the coronavirus pandemic.

In many scenarios created or affected by the pandemic, decision makers in hospitals and care homes will need to decide:

  • if new arrangements constitute a ‘deprivation of liberty’ (most will not), and
  • if the new measures do amount to a deprivation of liberty, whether a new DoLS authorisation will be required (in most cases it will not be).

If a new authorisation is required, decision makers should follow their usual DoLS processes, including those for urgent authorisations.

A summary of the key points to be taken from the guidance is outlined below:

Use of the MCA and DoLS due to Covid-19

  • During the pandemic, the principles of the MCA and the safeguards provided by DoLS still apply.
  • It may be necessary to change the usual care and treatment arrangements, for example to provide treatment for people with Covid-19, to move them to a new hospital or care home to better utilise resources or to protect them from becoming infected.
  • All decision makers are responsible for implementing the emergency Government health advice  and any decision made under the MCA must be made in relation to a particular individual, it cannot be made in relation to groups of people.

Best interest decisions

  • In many cases, a best interests decision will be sufficient to provide the necessary care and treatment for a person who lacks the capacity to consent to the care and/or treatment arrangements during this emergency period.
  • If an individual has made a valid and applicable advance decision to refuse the treatment in question, then the relevant treatment, even for Covid-19, cannot be provided.

Delivering life-saving treatment

  • Where life-saving treatment is being provided in care homes or hospitals, including for the treatment of Covid-19, then the person will not be deprived of liberty as long as the treatment is the same as would normally be given to any person without a mental disorder.
  • The DoLS will therefore not apply to the vast majority of patients who need life-saving treatment who lack the mental capacity to consent to that treatment, including treatment to prevent the deterioration of a person with Covid-19.

The full guidance can be found here.

Last updated on 14th April, 2020

As an employer, can I force employees to wear face masks at work?

An employer has a duty of care to its workforce and must take reasonable precautions to protect the health and safety of employees. Employers also have a duty of care towards anyone entering or using their place of business, such as visiting clients or customers.

This means that if an employer reasonably believes that wearing face masks at work is appropriate and necessary, it can issue an instruction to employees to this effect and employees should abide by this as far as possible.

However employers should be cautious about introducing and enforcing a policy across its business which requires its staff to wear face masks as there is the risk of unlawfully discriminating against people who are exempt from wearing face coverings or have legitimate reasons for not doing so. An employer should also consider the duty to make reasonable adjustments for disabled employees and discuss any concerns raised by employees who do not want to or feel unable to wear a mask.

Last updated on 25th September, 2020