Stuart Farr investigates the potential legal responsibilities that the firearms industry could face in the wake of Covid-19 disruptions.
It’s not all just about shortages of pasta, rice or loo rolls. Personally, I have few of these items left but that isn’t what worries me. The Covid-19 pandemic has had a unique effect both on our whole way of life and the UK economy.
As each day passes new challenges arise for businesses and no less so than in the gun trade where the impact has been equally dramatic. Some, as we know, have had to close their doors. Others were able to keep going but are now required to operate within a restricted and often difficult environment.
The initial priority for most businesses has been the protection of its employees but as the new “normal” begins to emerge those businesses able to carry on will be making important decisions regarding capacity, marketplace, cash flow, supply chains and distribution mechanisms.
In many cases solutions to those problems will be found. However, as the disparity between different commercial organisations becomes clearer it is inevitable that frustrations will set in and, in some cases, disputes will arise.
Knowing where you stand enables you to make informed decisions. This guidance note is aimed at highlighting some of the key areas to consider as part of your commercial dealings with other businesses which either stand outside the immediate gun trade sector or form part of your commercial circles.
Above all I implore you to act early. Take heed of these suggestions, get legal advice and act accordingly, but do not delay. When disputes arise (and they will), your preparedness will stand you and your business in good stead for achieving a more favourable outcome.
Contractual Relationships
Whether you are concerned about the ability of others in your supply chain to perform or, conversely, are struggling to meet your own contractual requirements here are some key points which may provide a solution to your problems:
Delivery and Variation
Some contracts provide for delivery of goods or services to be “of the essence”. Others do not. Many written contracts, however, do enable the parties to vary their obligations to each other by consent. Depending on the obligation, the contract may provide scope for re-negotiation which may help to facilitate either reduced or different levels of performance. Recording any changes accurately in writing is vitally important to avoid further confusion.
Payment Terms
Whether your contract provides for strict “upfront” payment terms or payment by instalments, it is important to check whether you are protected if payments are not forthcoming as and when they are due. A breach of payment terms may strengthen or weaken your position when it comes to handling an emerging dispute.
Be mindful also to check what assistance you may be entitled to receive under contracts of insurance and bear in mind that insurers are presently adopting a strict interpretation of their policies so ensuring that claims are made in a timely manner and fulfil the requirements of the policy in terms of disclosure is essential.
Force Majeure and Frustration
Some contracts expressly provide for specific conditions or circumstances where the obligations of the parties are suspended. Such force majeure clauses differ widely in their drafting and not all of them are enforceable or will entitle a party to walk away from the contract completely.
Indeed, most force majeure clauses provide only for the temporary suspension of performance of those obligations which are directly affected. The alternative might be reliance on legal “frustration”.
The law recognises that some contracts can become impossible to perform and while this is interpreted strictly, the current circumstances might allow your situation to fall into this category.
Termination Clauses
These are commonplace in many contracts but, again, their drafting varies greatly. The right to terminate may be linked to an insolvency event; a failure to meet a performance target; or it might be more general in nature. Either way, it is important to consider the consequences which flow from termination and your contracts may also expressly provide for that too.
All contracts are different and can be littered with pitfalls which might result in a breach of contract. So, for instance, the timing and method of termination can be strictly stipulated and non-compliance could result in it being ineffective if not done properly. A review before any action is taken can help to keep your business safe.
Written Contracts
In the absence of a written contract, the legal position becomes more fact sensitive. In the case of “one-off” contracts it is important to examine the communications which took place leading to the formation of the contract. From those, it is often possible to tease out the key terms and work out what was promised by one party and what would be given by the other in return.
In cases where the business relationship has been on-going for a period of time, it is often possible to determine the obligations of the parties by reference to their “consistent course of dealings”. This would involve an examination of a series of transactions to ascertain the basis on which the relationship has progressed and their behaviour toward one another.
Often business relationships carry several different nuances and complexities. However, once the factual circumstances are established then, with the appropriate legal advice and guidance, it is possible to work out your options and form a strategy for the resolution of the problem.
Quick Fixes
Knowledge is power and a review of your contractual position can quickly help you gain an informed understanding of the relative strengths and weaknesses of your position. With appropriate legal input you can get to the nub of the problem quickly and, hopefully, resolve it before it escalates.
There are numerous options available, whether it might involve cancelling or terminating a contract properly; establishing a safe “without prejudice” environment for re-negotiation; preparing suitable correspondence in the background for you to send yourself; or adopting a more “upfront” role to protect you and your business.
Do take comfort from the fact that litigation is not the only option—it is, however, just one of a range of tools which are available if needed.
As the court system slowly winds down its offering to disputing parties I fully expect that alternative forms of dispute resolution (ADR) will become prominent in the months to come across all sectors. Mediation, in particular, is a form of ADR which, even with the restrictions imposed by social distancing, can be conducted remotely and effectively.
As I continue to communicate with clients I am seeing an understandable level of frustration within business communities (including the gun trade) across the UK. “The coronavirus seems to be everyone’s excuse for doing nothing” is not an uncommon sentiment at the moment.
When it comes to resolving a dispute either doing “nothing”, doing the wrong thing or even doing the right thing badly can cause even more damage to your business. Therefore, I recommend that you are proactive rather than reactive in terms of your approach and strategies and seek appropriate advice where it is needed.
This situation will not last indefinitely but effective review and management of your problems and difficulties as they occur will go a long way to ensuring that you emerge from this situation as safely and as healthy as possible.
More on how coronavirus affects the gun industry
- Coronavirus: Stuart Farr on the industry’s biggest issues
- BASC freezes subs prices during coronavirus
- Coronavirus: Optimism Surges In Gun Trade
- Scottish government climbs down over coronavirus support scheme scandal
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