Up Again: Suppliers and contractors
Suppliers and contractors Q&A
Navigating the supply chain in a distressed market: My company supplies goods and I am concerned about the solvency of my customers. Are there any steps I can take to mitigate risk/my exposure?

Below is a brief overview of some solutions which may improve a supplier’s resilience:

  • retain title to goods supplied until all payments due from the customer are made;
  • periodic monitoring for example are customer’s accounts filed on time, any CCJs/winding up proceedings commenced, audit of stock segregation conditions at customer premises if holding goods supplied which are not yet paid for;
  • is credit insurance available?;
  • monitor and review level of credit exposure; and
  • procure payment on account.
Navigating the supply chain in a distressed market: My company relies upon the supply of goods/services and I am concerned about the solvency of my supplier? Are there any steps I can take to mitigate risk?

Below is a brief overview of some solutions which may improve a customer’s resilience:

  • identify key suppliers;
  • consider whether there are any alternative suppliers and what the timeframe would be for them to replace one of your existing suppliers?;
  • monitor potential knock on impact on your ability to deliver an onward supply contract; and
  • in the event of supplier distress, would that provide an opportunity to acquire assets/bring part of the production in-house?
How will legal disputes that have arisen as a result of COVID-19 or its effects (for instance, in relation to force majeure) be affected by restrictions being lifted and resuming business operations in whole or in part?

Disputes shall be settled on the basis of the facts available at the time the dispute arose. For example, disputes concerning force majeure require a statement on the presence of force majeure at a certain point in time, so in general, the removal of restrictions does not affect the subject matter of the dispute.

How should you manage those disputes once COVID-19 restrictions are lifted?

Irrespective of the lifting of restrictions, disputes shall be solved by judgment unless the dispute is settled. However, an amicable solution is always an option worth considering.

What should you do when restrictions are lifted if you have suffered loss under a contract as a result of COVID-19 or the restrictions, but have not yet taken legal action in relation to that loss?

In all cases, it is important to file a notice to the contracting party and to check whether the contract contains an agreed procedure for such an exceptional situation or other provisions on the effect of the exceptional situation on the contractual relationship. In such situations, it would be advisable to contact your legal counsel.

Is there any risk of mass claims being brought against your business? If so, how would such claims be brought? Are third party funders able to fund such claims?

In Finland, a mass claim can only be brought in consumer matters against companies and an action can only be brought by a consumer ombudsman. Industries at specific risk include tour operators, airlines and shipping companies. Third party funding is not a possibility in these consumer cases.

What should I do about recording contractually or otherwise any of the changes put in place during the COVID-19 lockdown period?

We recommend that changes made as a result of COVID-19 be recorded in the contract, for example in the form of a supplement or addition to the contract, and that these changes be taken into account when concluding a new contract.

Any return to normal will likely not be as immediate as the impact of COVID-19 when it started (e.g, sales/orders will take time to ramp up, raw materials will take time to flow through supply chains, etc.) what should I think about and do to best manage this in my contracts?

We recommend that you consider the possibility of a delay and agree on a procedure in the event of a such. In other respects, we recommend adhering to existing agreements and their processes to avoid other unnecessary risks.

What additional protections or changes to existing provisions (e.g. force majeure) should I put into any new supply arrangements having regard to COVID-19?

We recommend supplementing the force majeure condition to cover situations caused by pandemics. However, it would be important to assess each contractual relationship individually and carefully in order to maintain a contractual balance and avoid unfair contract terms.