COVID-19: Government publishes its expectations in respect of responsible behaviour by contract parties

The government has published non-statutory guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the COVID-19 (“Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the COVID-19 emergency”). The guidance seeks to persuade contract parties to act responsibly and fairly in carrying out and enforcing contractual terms, with a view to supporting the national interest with regard to the COVID-19 pandemic.

The guidance emphasises the importance of contract parties acting in a spirit of co-operation and aiming to achieve practical, just and equitable contract outcomes having regard to the impact on the other party (or parties), the availability of financial resources, the protection of public health and the national interest. The guidance identifies those aspects of a contract where the concept of responsible and fair behaviour is most likely to be relevant, none of which should be controversial. 

The guidance has no force of law. Therefore, there are possible limitations in respect of the scope and effect of the guidance. For example, in most cases, commercial parties are likely to only be concerned with their own interests and so will look to avail themselves of whatever remedies the contract affords to them.

However, although the guidance does not possess the force of law, compliance with it, may be a factor, which the court starts to take into account when exercising its absolute discretion as to costs. Therefore, a failure to comply with the guidance may lead to an adverse costs order being made against a party even if that party is successful with its case.”

The contents of this article do not constitute legal advice and are provided for general information purposes only.