The recent dismissal of 800 ship workers on board P&O Ferries has undoubtedly had a profound impact on people’s livelihoods and also had a knock-on effect for businesses and supply chains on both sides of the English Channel. In Kent, the increasing freight backlogs and implementation of Operation Brock along the M20, has not only created challenges and travel disruption for commuters but for businesses supplying Fast Moving Consumer Goods abroad, the disruption to supply chain lead times is likely to have had a profound effect on suppliers’ abilities to fulfill their contractual obligations to customers.
What are the issues for suppliers and customers?
Many suppliers and customers will already be familiar with the force majeure and termination provisions in their contracts, having paid particularly close attention to them over the last couple years in the wake of disruption and delays resulting from Brexit and the COVID-19 pandemic. A delay of any type, particularly in relation to just-in-time supply chains, greatly increases the risk of supplier’s customers being unable to meet the demands of their end-customers. As a result, where such delays become problematic for a customer, they may decide to take a closer look at their contract, to see whether it can be brought to an end and an alternative supplier arrangement be entered into, in order to satisfy customer demand.
Likewise, suppliers unable to fulfil orders will be keen to look more closely at their contract to see whether it excuses them from delay and whether delivery times can be extended.
Contractual implications for failure to perform
Naturally, a party’s legal position will very much depend on the precise wording of the contract. Generally speaking, where a party is prevented from performing its obligations due to events outside its control, this is likely to trigger the force majeure provision within their contract (providing one exists), resulting in the suspension (and possibly even bring to an end) their obligation to perform.
Depending on the severity of the breach, it may also be possible for a party to terminate the contract altogether. That said, the party terminating the contract must carefully consider whether it is in fact entitled to terminate, as terminating a contract when there is no right to do so, may give the other party the right to bring a damages claim.
Alternatively, where a contract becomes frustrated and is no longer capable of being performed, it may even be possible for the parties to discharge their obligations under the contract altogether.
For further advice on this and other Corporate & Commercial issues, please contact Chris Brightling, Caroline Armitage or Jonathan Masucci.
