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COVID-19 - The Impact on Commercial Contracts and Commercial Loans

Many businesses will be concerned about the impact of COVID-19, and any subsequent economic and social changes, on their commercial contracts. Now more than ever is the time to update your terms and conditions for any new contracts you enter into, to ensure you have adequate provisions that deal with possible disruption going forward.


Our experienced Business Services team can advise you on the provisions of your current commercial contracts, give you clear advice as to where you stand legally, and provide speedy assistance if you wish to update your current terms and conditions.

Some issues which are likely to need consideration in commercial contracts (business to business) at this time include:

  • Force Majeure – there is often a clause in terms and conditions dealing with events beyond the parties’ control, however this needs to be properly worded to cover an epidemic or pandemic. The way in which this should be dealt with on a practical level needs careful thought.
  • Variation provisions– it may be appropriate to allow the parties to vary the terms and maintain a relationship, if an aspect of the contract cannot be performed due to COVID-19. The scope of this and timing of it again needs to be considered carefully.
  • Termination and suspension provisions – if these are in your current terms and conditions then they need to be reviewed so you are aware of both parties’ options to deal with the impact of COVID-19 and any possible knock on effect it may have on third parties. If you were to revise your terms and conditions for future contracts, these again need to be carefully drafted to ensure you maintain your options to minimise cost and delays in the event of further disruption.
  • Notice provisions – as many businesses are not operating from their premises in the normal way, these need to be considered to ensure you do not miss receipt of a notice that has been served. Alternative provisions for service such as to a nominated e-mail address may be useful in any revised terms and conditions.
  • Remedy provisions – often businesses rely on outdated terms and conditions with onerous provisions as to what loss and damages they can claim if the other party breaches their obligations under a contract. However sometimes these are not enforceable due to outdated or inappropriate wording. If you have not recently sought legal advice on your terms and conditions, we would advise you to do so to avoid any issues with these provisions not being enforceable if a contractual dispute arose.
  • Limitation of liability clauses – again outdated or onerous provisions can be unenforceable. In a time when risk is higher for businesses it is important to seek legal advice on your current provisions to check they are appropriate and would stand up in court if any dispute arose. If they are not enforceable your liability if you breach a contract could be much higher than you anticipated. Likewise, you need to ensure that the other party is on the hook for what you anticipate them to be under the contract if they were to breach.
  • Payment terms – these may need to be reviewed to protect your cash flow in light of a possible economic downturn.


Consumer contracts are strictly controlled by law as to the ways in which a business can limit its liability or delay delivery of goods and services to consumers. However we can advise you on the best way to give your business protection within the limits of the Consumer Rights Act 2015.


We would also recommend our business clients check the terms of any commercial loans or facilities which they currently have in place. These documents will typically have in place practical and financial covenants which require businesses to comply with certain obligations and provide certain information to lenders. Businesses need to check they can still comply with these requirements in the lock-down and beyond.

Commercial loans often require the borrower to provide ongoing representations regarding their financial position and to report any changes. If cash flow of a business has been impacted (even temporarily) due to COVID-19 then this may require action or reporting to the lender. Often there may be a “material adverse change” clause where if an event has a significant negative impact on a business it triggers a possible default of the facility.


For further advice please contact Shaun Owen on or 01905 723561.

Added: 30 Apr 2020 14:54

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