The chaos caused by the recent bad weather reinforces the need for businesses to ensure that their standard contract terms appropriately address the situation where adverse weather conditions, or other circumstances outwith their control, prevent them from fulfilling their contracts.
With the UK experiencing Arctic conditions during the last two winters, and more of the same forecast for the coming years, now is the time for businesses to:-
- check how (if at all) their terms of business address non-performance due to adverse weather; and
- check that their procedures for engaging new customers and orders successfully incorporate their terms of business into individual customer relationships and contracts.
Adverse weather and other "force majeure" events
Generally parties will only be relieved from liability for not fulfilling their contractual obligations to the extent that is provided for in the written terms of the contract. Whilst exceptional circumstances that prevent performance of a contract may constitute frustration of the contract at common law (and provide some relief from liability) that is by no means guaranteed to provide a reliable solution.
Contracts frequently include a "force majeure" clause providing that where parties are prevented from performing their obligations due to certain events outwith their reasonable control the affected obligations are suspended for so long as those circumstances persist and will have no liability to the extent that the non-performance is due to those circumstances.
Any such clause should be written in reasonable terms so as not to be regarded as an "escape hatch" for suppliers when the going gets tough. Force majeure clauses are sometimes written in fairly general terms. However it will be preferable to identify (as best one can) and include specific events such as adverse weather, industrial disputes, etc. that will trigger the provision.
It will in any event be important from a business perspective to ensure that there is proper communication with the customer explaining the circumstances and forewarning of the possibility of delayed performance or non-performance (for example, due to the adverse weather conditions causing a specified delivery date to be missed).
Are your standard business terms incorporated into the contract?
Whilst your standard business terms may contain a well crafted and reasonable "force majeure" clause that will be of no benefit if the terms have not been incorporated into the particular customer contract.
A review of your business process for establishing customer relationships and contracts should clarify whether you are successfully incorporating your standard terms of business.
That review should consider:-
- how and when the standard terms are provided to the customer;
- how the business deals with the situation where your customer puts forward his own standard terms of business;
- whether adequate "paper trails" and records of the business relationship are being maintained for those (hopefully unlikely) occasions where they may need to be examined, relied upon and/or enforced. This applies as much to situations where steps need to be taken to enforce payment by a customer as to limitation of your organisation's liability due to force majeure events.
Conclusion and recommendation
Now, when the thaw is beginning to set in, is the time to review your standard terms of business and customer communication procedures to ensure that as and when the snow drifts and rain storms return your organisation will have the protection under its business contracts that it expects and needs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.