Caught in the middle: consumer-facing businesses with obligations to third party suppliers

With the new restrictions on travel and movement that came into place on 23 March in the UK with the intention of containing the Covid-19 pandemic, where does this leave your business in respect of obligations owed to third party businesses?

Many consumer-facing businesses rely on third party suppliers. This is particularly the case in the events and hospitality industry.

But being the intermediary company in current circumstances causes a wide range of legal issues to arise. Putting aside consumer rights, some of the things you should be thinking about in respect of your business-to-business contracts are:

• Are you exposed by holding consumer deposits that you may need to return in order to comply with consumer protection legislation, but are still obliged to make payments to your third party suppliers in any event? Check your back-to-back rights and obligations across your downstream and upstream supply contracts.
• Do you have written agreements in place? If so, review your rights and obligations in respect of payment and performance.
• Did you include a force majeure clause in the contracts? If so, what does the clause say in terms of force majeure events, delays, termination rights and mitigation?
• What terms did your third party supplier impose on you in respect of deposits and cancellation charges? Are these enforceable, or is there an argument that they amount to an unenforceable penalty charge under English law?
• If your consumer clients are willing to postpone the event, but at a reduced price, can you pass the reduction on to your third party suppliers?

With any luck it is possible that some if not all of your third party suppliers will value and recognise your partnership and be willing to reach a commercial agreement as to the way forward. But, in agreeing to any such agreement, be aware that it may constitute a variation of your contractual terms going forwards, which may not be so desirable when you return to business as usual.