The Cabinet Office has issued guidance and recommendations for contractual behaviour in performing and enforcing contracts affected by the Covid-19 emergency. It is encouraging businesses, individuals and public authorities to act “responsibly and fairly” in the national interest, so as to support the response to Covid-19 and protect jobs and the economy.
Whilst the aim is laudable, the guidance is light on detail. Parties to a contract are urged to “be responsible and proportionate” in responding to performance issues and enforcing their rights, to co-operate, and to aim to achieve “practical, just and equitable” outcomes. There is no general duty to act in “good faith” in most English law contracts, but the guidance indicates the Government expects parties to act as if there were during the pandemic.
The guidance lists a number of areas where parties are expected to act “responsibly and fairly”. These include requesting and agreeing extensions of time, substitute performance, other variations, and compensation; requesting and agreeing relief for under-performance and exercising remedies for under-performance; making and responding to claims of force majeure or frustration, and under change of law clauses; making and responding to damages claims; returning part-payments; exercising termination rights; and commencing dispute resolution procedures. Parties should seek to resolve issues by negotiation, mediation or other alternative dispute resolution before they reach an intractable dispute. The guidance stresses the need to keep records of the behaviours and decisions referred to.
The note may be supplemented by FAQs in future. But so far at least, there is no detail about the actual behaviour which is expected. The note does not address the fact that what helps one party to the contract is likely to have a corresponding negative impact on the other party or at other points in the supply chain, or how a fair allocation of risk to be assessed if one abandons the allocation already agreed in the contract.
It certainly gives scope for banging the table in negotiations and arguing that one’s own position is fair and reasonable (and the other party’s is not) – but it’s not clear how it can be applied in practice, or how it can be enforced. It may be most relevant where a contract gives a party a discretion on how to act.
It is non-statutory, non-binding, guidance, and does not override any specific government guidance, specific contractual provisions or general law.
The weight placed on non-binding government guidance depends on its authorship, the quality of the work done in its production, the extent to which (possibly competing) interests of those likely to be affected are recognised and weighed, the importance of any general public policy which the guidance seeks to promote, and the express terms of the guidance. The lack of detail is likely to reduce the weight of the guidance, but this may be countered by the critical importance of the public policy which it promotes.
The real impact may be the explicit warning that the Government will continue to review behaviour, and that the guidance may be revised, and “further measures may be taken” including legislation. Given the Government’s majority, more radical intervention - at least in high-profile sectors - could follow if the guidance is not followed.
 Ali v London Borough of Newham (2012)
the Government is strongly encouraging all individuals, businesses (including funders) and public authorities to act responsibly and fairly in the national interest in performing and enforcing their contracts, to support the response to Covid-19 and to protect jobs and the economy …. … Further measures may be taken in respect of the guidance and recommendations in this note, including legislation.