“Many businesses have been left with unpaid invoices due the financial implications of the pandemic. There has also been an increase in disputes resulting from companies struggling to meet contractual obligations for a number of reasons, sometimes outside their control. For example, goods being held up in other countries, the inability to continue work due to government restrictions or one party to the contract triggering their force majeure clause.
“Many commercial contracts contain a force majeure clause and its purpose is to protect the parties from a breach of contract if they are unable to perform their obligations.”
Has Coronavirus changed the types of disputes we have seen this year?
“In March, there was a focus on how contracts could still be performed by businesses despite any changes in circumstances. We found people worked together to try and find a solution rather than engaging in disputes, as everyone was facing the same problem and time and resources were better spent on navigating a resolution.
“As we acclimatised to lockdown, disputes became more about when the invoices were going to be paid as most businesses were facing financial struggles. Court action was seen as a last resort because the Court system was facing delays in having cases heard.”
Has the pandemic made some disputes more complex and if so, how?
“I would not say they have become more complex – the legal position has remained constant. That said, the tricky issues of force majeure clauses and Business Interruption Insurance have probably generated most disputes outside money claims.”
How quickly are disputes being resolved during the pandemic?
“If a dispute is taken to court, the parties involved can expect the process to take longer than it would have pre-pandemic. The Court system, which was already over capacity before the pandemic, is considerably backlogged and many cases may not be heard for months.
“Parties are looking at alternative ways of resolving disputes, such as mediation, which has worked well remotely.”
Have the laws around commercial contract disputes altered as a result of the pandemic? If so, what will this mean for disputes in 2021?
“There is a hiatus in being able to issue winding up petitions so that companies had some protection from creditors. Whilst that was not a change in law in regards to how to proceed, it provided relief to many, especially within the hospitality and leisure sectors.”
What are the main legal issues people should be aware of when opening a commercial contract dispute?
“Before starting a commercial contract dispute, you should always check the provisions of the contract you have entered in to and analyse the meaning of the words. What you have agreed to do and what is the right thing to do can often differ, and it is always the former the Court will look at when determining a case.
“If the matter relates to a financial dispute, it is wise to check whether the other side has the means to pay the debt, as this may well determine how you decide to proceed.
“It is always worth considering alternative forms of dispute resolution. These are increasingly built in to contracts to prevent one party launching straight in to proceedings and may help to sustain the commercial relationship.”
At what stage should people seek legal advice if they find themselves faced with a potential dispute?
“Most businesses seek to resolve matters internally, and they also realise when a case is not capable of resolution. However, if you are unsure about the best course of action, you should seek legal advice as soon as possible so you can receive guidance on the direction you should take.”
By Alka Kharbanda, head of the Dispute Resolution team at Blaser Mills Law.