The obligations on a supplier will depend on the precise wording of the relevant contract. Suppliers need to review the agreed contractual terms in order to determine if there is any possible relief in event of an inability to supply (such as a force majeure clause) or if there are any other terms, or where the counterparty becomes insolvent) that can be exercised.
If it is included in the relevant contract, a supplier may also seek to rely on material hardship clauses (often seen in the chemicals sector) which can temporarily alter a party's contractual obligations in circumstances where they are suffering from material hardship(typically financial hardship).
If a supplier does wish to exercise a termination right that is included in a contract, it is important that parties to contracts carefully consider their obligations in relation to the delivery of notices.
As new contracts continue to be negotiated in the current environment, we are noticing a trend of suppliers becoming more acutely aware of the provisions relating to certainty of supply and are actively seeking to incorporate limitations which have arisen due to the COVID-19 pandemic. As contracts become more sophisticated in this area, often with bespoke provisions applicable to the specific supplier's business, it emphasizes the need to carefully examine the agreed contractual terms before deciding on an appropriate course of action if difficulties do arise.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
