Retail Brands - locked in during lockdown?

With a number of high street brands feeling the impact of Covid-19, many are making changes to the way they operate by closing stores, focusing on online platforms or suspending operations.  However, this can lead to contractual disputes between the retailer and their suppliers.

The relationship between retailer and supplier will typically be governed by the terms of a negotiated contract, or general terms and conditions which will apply to a number of the retailer's suppliers. The contract will set out the obligations of the parties and the (often limited) circumstances in which the parties will be released from those obligations.

Due to the ongoing pandemic, there are a number of factors impacting high street brands: reduced demand; changes to work force and working conditions; supply chain issues; and restrictions on imports and exports. All of these factors may make it difficult for retailers and suppliers to comply with their contractual obligations. However, depending on the terms of the contract, these factors are unlikely to automatically release a party from their contractual obligations.

As a result, retailers and suppliers may face difficulties with one party looking to unilaterally: amend payment terms (such as applying discounts or extending payment timescales); invoke force majeure clauses (if the contract permits); and cancel or amend orders in production; or terminate the contract.  This can lead to complex issues of breach of contract and the consequences of termination.

In these circumstances, retailers and suppliers will be faced with a decision about how to resolve their dispute and whether they are able to maintain a long-term relationship beyond the current crisis.