Contracts, Covid and Christmas shopping

We are all getting ready to celebrate the holidays in an unfamiliar way this year. Instead of the usual festivities, the year is set to conclude with restrictions on gatherings, virtual office parties, drive-in pantomimes – and an increase in online shopping.

With ongoing Covid health concerns and the enforced closure of shops in a number of areas, there have been various reports of a surge in the number of shoppers who have been forced to do their festive shopping online in 2020.

Whilst this may be good news for online retailers and delivery companies, it also may place an unanticipated strain on the supply chain and resources of these businesses. Certain products may be more in demand, stock may need to be ordered, distributed and delivered differently, or within different timescales, and there will be a significant increase in web traffic.

Most businesses will no doubt want to do what they can to meet their customers' or clients' needs and demands (in addition to maximising their own profits) and they may be prepared to stretch their resources in order to do so. However, a strain on resources can lead to missed deadlines, failures to fulfil orders, websites crashing and, ultimately, the potential for losses to be incurred throughout the supply chain and delivery network. At the other end of the spectrum, there will be those businesses who have seen the demand for their products or services drop significantly and are considering how to minimise their losses. All of this can lead to a dispute.

What does the contract say?

In the event that a dispute does arise, businesses will need to look at their contracts and establish what their obligations and responsibilities are, and what the consequences of any breach of these may be.

Previous blogs have looked at the potential application of force majeure clauses in the context of the coronavirus pandemic and these may continue to be relevant given the level of disruption and government intervention still impacting the day to day operations of many businesses. However, in many cases, parties will not be able to rely upon these provisions to excuse them from a failure to fulfil their obligations and it will be necessary for them to consider what the rest of the contract says.

Therefore, for businesses facing unanticipated shopping patterns and an increase in last minute demand, it would be worthwhile taking the time to review the provisions of existing contracts, and any terms to which they are being asked to sign up, in order to understand where the risk for them lies, who might bear responsibility in the event that things go wrong and what the potential consequences and worst case scenarios may be. For example, there may be exclusions or limitations of liability which prevent a full recovery in the event of a loss, an assumption of responsibility for third party losses/claims or provisions which allow the contract to be terminated in the event of a breach.

By identifying potential issues and risks in advance, this may allow protective steps to be taken and expectations to be managed. Otherwise, what may start as a well-meaning attempt to accommodate the demands of a client or customer during the busy holiday period may soon lead to a difficult dispute which not only damages the business relationship, but potentially leads to a significant financial claim and a different kind of headache to kick off 2021!