Disputes Quick Read: government guidance for contracts impacted by COVID-19

QUICK READ

On 7 May 2020, the Cabinet Office published its guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the COVID-19 emergency. The guidance identifies "objectives of responsible and fair behaviour" and lists aspects of contractual performance in relation to which responsible and fair behaviour is encouraged.

The overall message is to ensure that contractual and economic activity can be preserved. Fair conduct is encouraged in variety of scenarios ranging from contractual variation to events of default to ADR to enforcement. However, as non-statutory guidance, the document does not affect or override parties' rights under contract or at law.

We think that the sentiment of the guidance is to be welcomed. In the current circumstances, contracting parties faced with performance issues should of course (where possible) attempt to work together to achieve practical and fair outcomes.

But it's right that it should remain guidance only. For one thing, it would it be difficult to legislate in relation to many of the issues covered by the guidance – especially at short notice. Furthermore, given the difficulties of creating a 'one size fits all' approach to contract issues, it is important that parties have available to them their usual rights to respond as they consider appropriate.

It will be interesting to see the extent to which parties invoke the guidance in future disputes.

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