COVID-19 and contracts, meetings and signatures
Some helpful tips and recommendations from Lester Aldridge Solicitors for New Forest businesses - regarding contracts, meetings and the signing of documents
This month's Life Matters from Lester Aldridge has temporarily become Business Legal Matters, it was written by Thomas Harrington, Trainee Solicitor and edited by Geoff Trobridge, Partner. Contact Lester Aldridge for a free consultation - see links below.
COVID-19: Three Areas of Concerns and Recommendations
COVID-19 has caused a great deal of concern to many businesses. In this article, I will be briefly covering three of the predominant issues our clients face and have raised with us, as these will affect businesses in general through this period of uncertainty.
Contracts - can we comply?
One of the imminent concerns for business, but also one which is ongoing, involves the performance of commercial contracts. Due to COVID-19’s far reaching impact on supply chains and required remote working, some businesses will rightly have concerns over whether they are able to comply with their obligations or alternatively, what their contractual position is, should another party express their inability to perform their contractual obligation.
A contractual review should be undertaken, with such a review looking in particular at the following:
- to what extent, if any, does the contract provide for time and manner of performance?
- is time of the essence, i.e. is the completion of the contract by a specific date a condition of the contract?
- must performance of the contract occur in a certain manner for the contract to be successfully carried out?
- is there a force majeure clause within the contract, i.e. a clause excusing one or both parties from performance of the contract in some way following the occurrence of certain events which are outside a party’s control?
- if so, does it cover COVID-19, e.g. events including pandemics or epidemics?
- if there is no such force majeure clause, will the non-performance due to COVID-19 be covered by the legal doctrine of frustration?
- what remedies could be available for any losses incurred as a result of non-performance either under a force majeure clause or through the doctrine of frustration?
Following a contractual review, a commercial and practical approach can be formulated. This can be discussed with the other parties to the contract, with the aim to minimise the effects of the inability to perform obligations and seek to resolve matters outside of the courts.
This approach should also be adopted for employment contracts, to easily assess multiple factors relevant to COVID-19 including contractual sick pay, permitted reduction in hours, or the ability to Furlough employees without their consent.
Meetings - how do we meet our obligations?
The introduction of social distancing, remote working, and the restriction of unnecessary travel has meant that many private limited companies are unable to hold either board meetings or general meetings in the manner they may be accustomed to.
It should be noted that there is no statutory requirement for either a board meeting or a general meeting to be held for private limited companies (rules for public companies differ). The next step is to check the Articles of Association for the company. If these contain a provision, which dictates that either board meetings or general meeting must be held, then these provisions supersede any statutory position.
Once it is determined whether a meeting must be (or is wished to be) held, can this meeting be effectively held, and with legal standing, by virtual means? The Companies Act 2006 generally allows for e-communication, and expressly allows general meetings to take place virtually (section 360A). Again, the Company’s Articles of Association should be reviewed for any provisions relating to telephone or video conferencing, as these will again supersede any statutory conflicts.
How should they be conducted? In light of the current COVID-19 lockdown, on 28 March 2020, The Chartered Governance Institute published an in-depth guidance note on good practice regarding the holding of virtual meetings, which can be found here, and should be consulted to ensure these meeting run as effectively as possible. However, where possible, alternatives methods should be employed such as written resolutions.
Signing of Documents - how do we complete the formalities?
Depending on the type of legal document and legal personality of the executing party, there may be a number of formalities that will need to be complied with in order for the document to be validly executed. Execution is the demonstration of intent and acceptance to be bound by the terms of the document, and is required for a document to have legal validity and ensure enforceability. One such formality may be that the document requires a signature.
However, in the current circumstance, what options are available for those who cannot physical sign the document?
For signatures, the following options have legal validity:
- Solicitors signing on behalf of their client (applicable for simple contracts only); and
- The signatory uses an electronic signature.
Electronic signatures can take a variety of legally valid forms including the following:
- A scanned manuscript signature.
- A biodynamic manual signature such as using a finger or stylus to sign their name on the document via touch screen.
- Typing the signatory’s name into the electronic document (including initials)
- Clicking an icon on a website.
- Signing through an e-signing platform.
The Law Commission’s 2019 report on electronic execution concludes that an electronic signature is capable in law of being used to execute a document (including a deed) if the person signing intends to authenticate the document, and any other formalities to execute that document are complied with, such as the signature be witnessed. The law is not so concerned with the form of the signature provided an intention to authenticate the document can be demonstrated i.e. did the signatory wished to be bound by the terms. It should also be noted that a witness is also able to sign with an electronic signature if that formality is required to execute the document.
For more information on electronic signatures, and how all formalities for valid execution can be maintained during this lockdown, please click here.
Free consultation with Lester Aldridge Solicitors
Lester Aldridge Solicitors are based in London, Southampton and Bournemouth - where the office covering the New Forest is situated conveniently close to the main Bournemouth train station. Their specialist teams in the various fields of law will be happy to advise and assist you, starting with a completely free initial consultation during which you can decide whether you feel able to trust them with your confidential information. For more information please click here. Currently during the coronavirus crisis of course consultations are via virtual meetings : advice is available through phone, email, Skype and Zoom.