How to Avoid Litigation Becoming Yet Another Cost of COVID-19

The last few months have been rather surreal for businesses. Many have seen a drop-off in income that will really start to bite as government support such as the job retention scheme is rolled back. Maintaining a pre-crisis workforce simply won’t be viable if revenue remains depressed or if social distancing makes it impossible to fully restore operating capacity.

The scale of future business uncertainty is probably best illustrated by the expectation that around 50% of Bounce Back loans will never be repaid. That prediction underlines that adjusting to new trading conditions won’t be straightforward.

The other cloud on the horizon is there are contracts in place that pre-date the pandemic that cannot be simply ripped up and forgotten about. These contracts can affect employment, leases and commercial arrangements for sales or supplies and that’s before we consider disputes within businesses such as between partners and shareholders or arrangements with HMRC.

Before they have recovered from the impact of Covid-19 there’s every chance that businesses could be facing a wave of breach of contract litigation that will be expensive and time-consuming. Those details buried in the small print that you never paid much attention to might be about to bite.

Act Now to Avoid Problems

The good news is that it’s often possible to avoid litigation if you take the right action early enough. A helpful first step would be to audit the contracts that are likely to be subject to a breach, either by you or the other party.

It might then be possible to avoid disputes or settle them without litigation. Specific actions could include the following:

  • Adjusting the terms of selected clauses within an existing agreement
  • Agreeing time-limits
  • Suspending certain clauses altogether
  • Negotiating an entirely new agreement

Litigation should always be the last resort and in most cases both parties recognise that it’s in their interests to find a mutually agreeable settlement. Taking the initiative can help defuse situations before parties to the contract take up entrenched positions.

Consulting a solicitor might seem like an expense you can do without right now. However, it is probably a wise move at this time if you want to avoid the stress and cost of a breach of contract dispute. Contact us on 01934 623 501 or email helpforyourbusiness@powellslaw.com.

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