- Commercial contracts
We would advise you to assess the operational risks of Coronavirus to determine what your rights are if the school or suppliers are prevented from performing contractual obligations such as cleaning, ground maintenance and catering.
Our advice is to be prepared. We advise that you take the time now to familiarise yourself with your contracts and your business continuity plan. Commercial contracts typically contain force majeure clauses that allow a period of relief in performance where circumstances arise that are beyond the parties’ control. We would advise however that you seek legal advice before invoking a force majeure clause or where the other side is seeking to rely on force majeure, so that you fully understand your rights.
If your contract does not contain a force majeure clause, this will not be implied but there may be other legal remedies available.
If you are in the process of negotiating new contracts, we advise that you seek legal advice before signing them off so as to ensure your school is as protected contractually, as much as it can be, from service disruption.
Electronic signatures are valid under English law, although this is subject to the proviso that any execution formalities are satisfied.
Some further practical tips:
- Ensure your list of authorised signatories is up to date and readily available? If your usual signatories are unavailable, do any additional approvals need to be put in place, including any approvals for the use of electronic signatures?
- Is it sensible to add extra persons to the list of authorised signatories?
- If the usual signatories are working remotely do they have access to a printer and a scanner in order to print and return signed documents?
- Has your IT team considered if using a cloud-based e-signing platform is appropriate?
We advise that you check your insurance policies to determine the extent of the cover (if any) in the event of Coronavirus disruption (including school closure). In terms of coverage, some things to look for are whether your insurance policy covers unforeseen costs: e.g. supply staff, and also alternative arrangements such as when school trips have to be cancelled.
You may also have business interruption insurance. You should check what this covers. For example, you may also suffer loss of income from lettings, hiring premises for events and exams.
Independent schools should check if their parent contract has specific provisions relating to a refund of fees to parents if the school has been wholly unable to perform its obligations for a continuous period. This clause is sometimes included when a school’s business interruption (or similar) insurance policy includes cover for ‘loss of revenue’ and the school has had to close, in which case the insurance policy may indemnify the school for that lost fee income which should in turn be repaid to parents.
If your school buys into the Risk Protection Arrangements, then we would advise that you speak to the RPA team to understand your rights in the event of school closure and business interruption.
- Which contracts are the most problematic for schools?
We understand that schools will continue to be paid the General Annual Grant throughout the school closure period and their main revenue will therefore be protected. Schools may however be at risk of losing income from lettings (eg Easter holiday clubs, afterschool clubs) and other sources, and so it is important that contracts are checked to determine what rights the school has. Depending on the relationship it may be that pragmatic positions can be reached between the school and hirers, but each scenario will depend on a combination of the contract terms and any commercial arrangements reached between the parties.
Schools are also growing increasingly concerned about their catering and transport contracts, which rely heavily on parent income. With school closures there will be little income from students to cover outgoings, and it will be important for the schools to understand their contractual rights. As with lettings, it may be that a pragmatic solution can be reached during the school closure period. Our advice to schools is to understand your rights and use them to negotiate your position.
Coronavirus (COVID-19) commercial issues for schools
The law and practice referred to in this article has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.