REUTERS | Mike Blake

Ask Commercial trends: evergreen contract issues

In-house lawyers have had a lot to grapple with in recent years: from advising on the implications of Brexit, through the challenges and opportunities arising from developments in digital technology, to the diverse range of legal problems presented by the COVID-19 pandemic.

Generally, the questions Practical Law Commercial receive through our Ask service reflect these trends. But whatever the hot topic of the moment, one theme has remained constant throughout: we receive many more questions on general contract and boilerplate than on any other topic.

Limitation of liability and indemnity clauses

The first three months of 2022 are no exception. Two perennials are questions on limitation of liability and indemnity clauses and we saw the two in combination in Do indemnities ordinarily sit outside a liability cap?. There is no general rule that a limitation of liability has no effect on an indemnity; to minimise disputes arising, the relationship between the two clauses should be addressed in the drafting.

The answer is therefore one that regular subscribers will recognise as common to many of our answers to questions concerning general contract law: that the starting point, and very often the end point, is one of contract interpretation. This is also true of another recent question on indemnity clauses, Do I need a separate indemnity against the legal costs of enforcing an indemnity?.

Variation and novation of contracts

Questions on variation and novation of contracts are also consistent regulars. Two recent questions on novation that we’ve answered are Where a contract has been novated, can the incoming party invoice the continuing party for payments due for work completed by the outgoing party prior to novation? and Can we do a novation of a framework agreement and its call-off contracts in a single document?.

The answer to the first question touches on something that crops up frequently with questions about novation, that is, that the courts are prepared to infer novation by conduct where this is necessary. However, as the answer makes clear, this is no substitute for comprehensive drafting. The second highlights the practical challenges that can arise in simply documenting a novation.

The reason for the enduring popularity of questions on novation is not immediately obvious, save perhaps that the neat textbook analysis of novation does not always sit easily with the complex set of circumstances confronting the in-house lawyer on the ground.

Force majeure and frustration

By contrast, no one will be surprised to learn that questions on force majeure, and to a lesser extent frustration, have been more prevalent in recent years. We saw a particular surge in 2020, with the pandemic, and although there has been a slowing down since, they continue to be regular visitors to our dashboard.

A recent illustration is Is the buyer expected to continue making payments under the contract if the supplier declares a “force majeure”?. There is no recognised meaning of force majeure in English law. The answer to this question, of course, depends on the drafting of the force majeure clause and, failing that, whether the remedy of restitution might apply. This continues a line of questions that we encountered regularly in the wake of the COVID-19-driven lockdowns.

It may be that the crisis in Ukraine, and its consequences for supply chains, prompts a fresh wave of force majeure and frustration questions. What is clear to us, though, is that unsurprisingly contract issues remain at the heart of a commercial in-house lawyer’s day job.

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