9 April 2020
Product Protection – 6 of 20 Insights
Disputes Quick Read: COVID-19 and supply chain disruption – key issues
Supply chain operations continue to feel the impact of COVID-19, with many key manufacturing hubs being hit the hardest. Those companies heavily reliant on China for products, raw materials or component parts are experiencing unprecedented disruption. Challenges include:
- quarantine restrictions
- port closures
- new export/import restrictions
- factory closures, and
- depleting warehouse workforces.
Supply chains are facing long lead times, delivery delays and failures to supply, as well as non-availability of goods and the need for alternative sourcing arrangements. As cash flows inevitably tighten, non-payment of goods will also be an issue. There have already been reports in the media of high profile retailers suspending payments to suppliers for existing stock due to lack of demand.
Appointing new suppliers on an urgent basis carries additional risks. Are there existing exclusivity arrangements in place? Can all new suppliers be traced? How do you audit product quality and safety systems when due diligence is limited? Product regulators have temporarily relaxed compliance for certain emergency products but not for broader application and existing safety standards will apply. Businesses may also need to re-structure customer service procedures to ensure compliance with statutory warranties and consumer rights for repairs or replacements.
It can be difficult to plan ahead and mitigate risks in times of crisis. Existing supply chain arrangements and insurance policies should be reviewed to assess exposure. Insurance coverage will depend on the precise wording of the policy and any exclusions. Business interruption claims do not always include losses from a general decline in demand.
There is value in seeking advice at an early stage to avoid common pitfalls in commercial negotiations such as a waiver of rights, unlawful termination or inadvertent contract variation, and to help secure a resolution to preserve trading relations. Key supply terms such as indemnities, liquidated damages and force majeure will all be important.
Finally, termination – often seen as a last resort, despite the ongoing disruption and uncertainty – should not be triggered without legal advice and a viable exit strategy which mitigates exposure where possible.
In this series
Launching a product on the GB market – Q&A guide
31 August 2021
by Multiple authors
Big changes coming to the EU's product safety regime
12 July 2021
Product liability and safety horizon scanning – key issues to look out for in 2021
20 January 2021
Power to the people – EU Directive on consumer representative actions moves one step closer to adoption
23 November 2020
Post-Brexit food and drink labelling in the UK: What producers need to know
12 November 2020
by Multiple authors
Disputes Quick Read: COVID-19 and supply chain disruption – key issues
9 April 2020
by Multiple authors
Product liability and safety – horizon scanning 2020
21 February 2020
High Court rules consumers cannot circumvent 10 year longstop for claims
Wilson v Beko [2019] EWHC 3362 (QB)
15 January 2020
"Natasha's Law" food labelling amendments published
17 September 2019
Allergens – DEFRA announces new UK labelling laws for food businesses
1 July 2019
Dutch Court of Appeal rules that ignorance over a medical aid's defect is not a sufficient defence
16 May 2019
UK Government issues guidance on proposed "no deal" product safety law changes
5 April 2019
BodyTech – a new wave of medical devices product liability litigation?
1 March 2019
Preparations for a post-Brexit consumer protection landscape
16 November 2018
High Court considers meaning of "defect" under the Consumer Protection Act 1987
18 June 2018
FSA updates technical guidance in light of new Natasha's Law
9 July 2020
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