Rightly or wrongly, we're all coming to terms with the normality of goods shortages, and more recently due to lack of HGV drivers arising out of Covid and compounded by Brexit. We've heard of a number of businesses which have either had to close due to these shortages or default on supply and with shortages in fuel supply, the end doesn't appear in sight.
Manufacturers are querying how can they avoid liability due to a shortage of HGV drivers preventing them from fulfilling their contractual obligations? Could they rely on force majeure to avoid liability? Unfortunately there is no one-size-fts-all answer and as with the position many businesses saw themselves in 18 months ago, in order to provide a concrete answer to this the following would need to be considered:
- Firstly, we would need to check whether a binding contract is in place with a customer to supply the goods. Manufacturers may have binding ongoing supply commitments to some customers, whereas other customers simply place ad hoc orders from time to time (which manufacturers can accept or reject at their discretion - e.g. under a framework). Manufacturers could prioritise their binding contractual commitments and potentially decline the ad hoc orders in order to manage their capacity to supply.
- The next step, (if a binding contract is found to be in place), is to understand whether those contracts contain fixed delivery/performance dates (e.g. time for delivery is specified as being 'of the essence'), or whether the delivery/performance dates are simply estimates only. Given the current difficulties, the delivery/performance dates being estimates would be preferable and therefore if this is not the case, manufacturers should consider changing their standard terms now to ensure that delivery/performance dates for all future orders are estimates only. Whilst estimated timescales may exonerate liability, further consideration would need to be given as to potential rights of termination on the part of customers for significant delays.
- If manufacturers have a binding contract with firm delivery/performance dates, check whether that contract contains a force majeure clause and whether shortage of haulage availability falls within the scope of that clause. If the clause does not contain this, it is unlikely that manufacturers will be entitled to any such legal protection given that English law does not provide any default force majeure protection.
- Finally, even if a driver shortage falls within the contractual definition of a force majeure event, it must be the active cause of the delay or non-performance (i.e. it must make the delivery impossible not just more expensive to perform) before the clause can be relied upon.
A very broadly drafted force majeure clause may capture driver shortages, but a more tightly drafted force majeure clause is unlikely to. If customers are claiming due to the failure of meeting the delivery/performance obligations, manufacturers are advised to review their contracts to see if they are entitled to declare force majeure or what other exclusion/limitation of liability clauses may benefit them.
Our Commercial team at Forbes are specialists at drafting contractual terms and can assist with reviewing and updating them in light of this crisis or more generally. It is important to preserve relationships and by anticipating and making allowances in advance for potential shortages and delays this will assist when problems arise.
For more information contact John Pickervance in our Commercial department
via email or phone on 0333 207 1134.
Alternatively send any question through to Forbes Solicitors via our online Contact Form.
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