Swine flu: check your contracts

3 August 2009

04 August 2009

Buyers should check how prepared vendors are for an outbreak of swine flu if they want to avoid disruptions and contract disputes.

A number of lawyers have advised SM that purchasers should be asking "sensible and reasonable" questions of suppliers and checking the terms of contracts in case staff illness means vendors are unable to perform duties. Kelvin Balmont, senior associate at law firm Clarke Willmott, urged buyers to review the force majeure terms in their contracts. These can free one or both parties from liability when an extraordinary event prevents the fulfilment of obligations.

"We would strongly advise any business to review their terms and conditions and those of their suppliers to see where they stand in the event of such an outbreak," he said. "If you're particularly reliant on one supplier you should spread the risk and have the ability to switch over."

The British Chambers of Commerce (BCC) estimates that 100,000 people could catch the virus every day by the end of August, forcing one in eight people to take time off work.

BCC director general David Frost said: "It would be prudent to check contracts in case there are problems with delivery or payment due to an outbreak of swine flu."

Paul Carter Hemlin, director of Contract Management Direct, advised purchasers to send letters to all business critical vendors to find out what action they are taking to mitigate swine flu risks.

"Buyers should talk with suppliers to ensure they are taking every step to mitigate the risk of staff being struck down with the flu," added James Baily, partner at Herbert Smith.

Business continuity measures could include establishing a mandatory period where employees are barred from returning to work after they have been diagnosed with swine flu.

Baily said if suppliers cannot demonstrate they have taken adequate steps to stop the spread of infection following customer advice, buyers may be protected from force majeure terms.

According to the lawyers, the industries that are most likely to be affected include services, construction and logistics.

One lawyer said he was recently contacted by an event management supplier with concerns the virus would impact its ability to perform contractual duties.

SMaug2009

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