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The UK government has advised companies to try to avoid damaging court cases and to resolve contractual disputes relating to Covid-19 through mediation before heading to court. Lord Neuberger has already warned of a tsunami of cases and suggested a breathing space.  There are worries that the Coronavirus pandemic will result in a flood of lawsuits against struggling businesses that will clog up the civil courts as companies invoke contractual or penalty clauses. New guidance published by the Cabinet Office has urged groups to act reasonably in enforcing contracts, saying that a “plethora of disputes” can be “destructive”.

“Responsible and fair behaviour is strongly encouraged in performing and enforcing contracts where there has been a material impact from Covid -19”, the government guidance says, adding it would “strongly encourage” parties to resolve emerging contractual issues through mediation and negotiation before they “escalate into formal intractable disputes”.

The guidance says that:

At a time when individuals in the UK are being asked to act responsibly in their personal and work lives – by staying at home, social distancing and self isolating – it is also right that individuals, businesses (including funders) and public authorities who are parties to active contractual arrangements which are materially impacted by Covid-19 should consider their behaviour as part of the national response to the public health emergency we are currently facing.

Responsible and fair behaviour in contracts now – in particular in dealing with potential disputes – will result in better long-term outcomes for jobs and our economy. In complex contracting arrangements, this should apply throughout the contracting chain. It will in the long term protect businesses, supply chains and opportunities in the economy. Bad behaviour will be bad for jobs and will impair our economic recovery.

Electrical Contractors Association CEO Steve Bratt spoke in the Financial Times this week, and urged businesses to avoid damaging contractual disputes over COVID-19.

Steve Bratt, who is an active member of the CLC Coronavirus Task Force, said that the construction, infrastructure and facilities management sector had hundreds of thousands of small businesses linked by complex supply chains.

“We have been encouraging people to look at the bigger picture and encourage fair contractual behaviour rather than give someone else the problem,” he said. “Reputation is also an issue as when the crisis is over people will have long memories about who has behaved well.”

There is certainly a fear that the Courts which are already facing a backlog will be inundated with new cases and mediation could assist in reducing this. So, the message to businesses is act responsibly and mediate! To mediate your dispute please get in touch.