Disruption in the supply chain, business continuity and diversification

Global supply chains, even those that were not hugely dependent on Chinese factories, are strained by the disruption caused both by the virus itself and by the responses Governments have been left with no choice but to make. When we refer to the supply chain we refer to the specific areas of supply of labour; supply of goods and material, transport and the provision of services. The relevant issues in relation to supply of goods and material and the provision of services are touched on in this note. For a discussion in relation to the supply of labour and transport considerations please see the following links Coronavirus Job Retention Scheme and Drivers’ Hours

When considering your supply chain and ensuring the links remain strong in the current climate you would be wise to review your contractual positions. There is a need to look at how you will address the lack of supply, or claims from your suppliers for non-performance and the steps you will take to ensure that they continue to meet their contractual obligations, or seek relief from others for their failure to meet obligations. Questions such as, which contracts have time of the essence clauses, which contracts have built in service levels and penalty provisions should be asked.

Contractual terms with logistics providers should be considered as they will be critical in moving goods around. For more information on how this may be affecting the transport sector please refer to Drivers’ Hours.

Any legal review must be considered with the commercial realities the business may be facing. Reviewing the position now may help you create a strategy which will focus on those contractual relationships that are strongest and perhaps help assess the categories of contractual risk, seeking to vary or renegotiate terms as appropriate see ‘Are your new contracts valid?’. With processes and procedures in place to monitor your supply chain you should be able to spot difficulties early on and act accordingly.

This note is aimed at providing guidance where contracts are governed by English law and apply to UK parties but where you have cross border matters or where contracts are silent on the law which governs them, for example, please speak to us directly as guidance and advice will vary on a case by case basis.

For more information contact commercialdept@woodfines.co.uk

-Claire Le Mouëllic