The UK Cabinet Office has published guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the COVID-19 emergency (the 'Guidance'). It calls for a concerted effort to act “reasonably and fairly” in enforcing contracts materially affected by COVID-19.
The Guidance calls for a “spirit of co-operation” between parties in enforcing contracts. It appeals to parties to act with consideration "for their collective benefit and for the long-term benefit of the UK economy". This is unusual because it introduces a concept similar to acting 'in good faith' into considerations of contractual enforcement.
The Guidance states explicitly that it does not override specific contract terms. However, it gives us a non-exhaustive list of examples where responsible and fair behaviour should be observed:
- requesting or making payments;
- responding to force majeure or frustration claims;
- exercising remedies in respect of impaired performance;
- calling up securities;
- initiating or continuing an insolvency process;
- claiming breach of contract and enforcing default/termination provisions;
- commencing court proceedings and enforcing judgments.
The Guidance isn’t binding, so an over-enthusiastic party will not feel any effect of the law. However, it might be opening itself up to both adverse publicity and negative comment from a Court.
Parties to contracts should act responsibly and fairly, support the response to Covid-19 and protect jobs and the economy