On a daily basis, we continue to hear how the coronavirus (COVID-19) is engulfing thousands of people in chaos and affecting many industries worldwide. The beauty industry has been no exception.
No-one could have planned for this pandemic and no-one yet has the solution. As I currently write, England seems to be one of the last countries still not in ‘lock down’. As I continue to write, I’m feeling pretty pessimistic about that.
Many aspects of the beauty industry will be affected ranging from (and I’m at risk of aggressively over-simplifying matters here) make-up sampling (Sephora released a statement confirming that all in-store makeup and skincare testing would be suspended until further notice) through to supplier and distribution contracts.
Affected beauty businesses may need to consider, from an English law perspective, the contractual and legal issues arising from this situation. If you have entered into contacts with suppliers, distributors, manufacturers (or other parties), take note of the following which may be of relevance.
Under English law, contracts that require ongoing performance are, in principle, ‘absolute’. This means that any failure to perform your side of the bargain may be a breach of contract. There are two exceptions to the rule: the operation of any force majeure clause in a contract; and the common law concept of frustration. I will focus on force majeure.
A force majeure clause suspends (and may end) the performance of a party’s obligations where a party is prevented from performing by events outside its control (COVID-19 bites pretty hard here and most countries are restricting non-essential travel/encouraging self-isolation). Such a clause should ideally set out in detail what will happen if that is the case.
Not all force majeure clauses will look the same. The entire clause should be carefully considered with the following in mind:
- Is COVID-19 covered? Whilst you may not see express reference to ‘Coronavirus’ or ‘COVID-19’, you may instead see reference to ‘pandemic’ and/or ‘epidemic’. Bear in mind that the contractual drafting may not contain these buzzwords and instead may be a little ‘fluffier’. Reference may be made to a government decision or administrative action preventing performance that meets political interference language.
- Can I perform my contract or not? If you are seeking to rely on a force majeure clause, you must usually establish that the force majeure event has prevented or hindered you from performing the contract. You will need to carefully check the exact wording of the force majeure clause and consider the factual circumstances. Some force majeure clauses require performance to have been rendered impossible. It is unlikely that you will be entitled to cease performance of your contractual obligations on the basis that the goods or services are more difficult to perform or are more expensive.
- Do I have any obligations? The force majeure clause may provide that you have to give notice to the other party in the first instance. Check whether any wording such as this exists. In addition, under English law, a party has an obligation to reduce its risk of loss, this is known as ‘mitigation’. If you are claiming force majeure relief, you should be able to prove that you have taken reasonable steps to mitigate or avoid the effects of the force majeure event.
- Consequences of invoking force majeure clause. If your contract contains a force majeure clause and it fits the circumstances, it will lead to relief from performance, thereby avoiding the risk of a default termination. Generally speaking, parties will each bear their own costs arising from any force majeure delay but there are exceptions where compensation may be payable after a certain duration or certain costs are payable from one party to another.
In addition to considering the contents of any legal contracts, you should consider what practical measures you can start to implement, such as:
- Reminding staff of the importance of good hygiene practices, particularly thorough and regular hand washing (yes, that’s singing Happy Birthday two times);
- Providing accessible information on what COVID-19 is and the latest World Health Organization guidance on precautionary measures to be adopted and daily updates from the Prime Minister;
- Considering self-quarantining for those who have recently been in affected countries or been in close contact with visitors from affected countries, and advising them to work from home for a period following their return or contact;
- Considering self-quarantining for anyone exhibiting flu-like symptoms/continuous cough, with support on how best to seek medical care;
- Creating an alert system for any suspected or confirmed cases of COVID-19.
If any of your contracts contain a force majeure clause which you are considering relying on or, if you are considering bolstering your own terms and conditions or, more generally, if you have any further questions, please contact Mireille Turner (firstname.lastname@example.org).