Covid-19: Updated cabinet office guidance

On 30 June 2020 the Cabinet Office updated its guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency (the initial guidance is referred to in our May 2020 issue p 5). The update provides further guidance on payment, extensions of time and the avoidance and resolution of disputes. In relation to payment, parties are strongly encouraged to make prompt payment in accordance with contractual terms, legal requirements and the applicable guidance. It is particularly important than prompt payment is made to SMEs. As far as extensions of time are concerned, parties are encouraged to consider carefully and reasonably what reliefs may be granted, how additional costs should be dealt with and whether terms should be renegotiated in order to preserve the viability of the contract in the changed circumstances caused by the pandemic. There is also renewed encouragement to avoid formal disputes and, in addition to the exhortation to make use of processes such as the Low Value Disputes Model Adjudication Procedure which has recently been developed, parties are encouraged to consider the possibility of “an equitable adjustment or accommodation in contractual arrangements impacted by Covid-19.” The stated aims behind this guidance are the provision of support to restart the economy, the prevention of unnecessary insolvencies and the desire to support the long-term viability of contracts and of businesses.