A cautionary tale of why you need Terms and Conditions for your business.
We all read about the huge container ship the Ever Given stuck in the Suez Canal apparently due to a bad gust of wind. This blocked the canal for a few days. Over 300 ships were left stuck and waiting for the ship to be refloated. The alternative being a long and expensive diversion around the bottom of Africa.
This happened out of the blue.
What if your goods had been on the Ever Given or one of the other ships delayed and caught up with this. This happened to many businesses waiting for the arrival of their container.
What happened to those businesses waiting for their container? What if they required parts to finish manufacturing a product ? What if they had resold the items in the container to some other business?
Any goods being produced would be delayed.
Any buyer of your goods would not get what they had purchased at the time that had been agreed. They may have resold the goods and so it goes on down the chain. Lots of unhappy people all looking at the person above them for compensation for their losses.
But it was not my fault you say. No one is interested if you had agreed to supply the goods by a certain delivery date. You are liable for breach of contract and payment of damages.
How terms and Conditions can protect you.
- They can specify a delivery date that allows for external problems giving you some leeway.
- They can contain a Force Majeure clause. This mean that you are not in breach if problems are due to a major external cause over which you had no control. This used to be called the ‘Act of God’ clause but is now much wider. The more modern ones allow for problems caused by a pandemic providing cover against Covid 19.
To rely on a Force Majeure it has to be :
- Expressly mentioned in the Contract otherwise it does not apply
- Specify what events your Force Majeure covers as there is no set legal definition.
- The Force Majeure event you rely on must make something physically or legally impossible and not just difficult or unprofitable.
Effects of Force Majeure clause
This depends on what is written in the contract.
Generally it provides for all obligations to be suspended whilst the Force Majeure event continues.
When the Force Majeure event ends the obligations start again to apply.
In some cases, you may provide for the contract to be terminated if the event causing the problem continues for say six months.
What if there is no Force Majeure clause in the Contract- or no contract or Terms and Conditions
If you had a container on the Ever Given you would be in breach of contract if the goods did not arrive in time. No one is interested that it is not your fault. You should have taken the proper steps to protect your business.