Supply chains throughout the world have been adversely affected by the outbreak of coronavirus. Zambia has been no exception. This will particularly be exacerbated by the fact that a myriad of Southern African countries have elected to close their borders. There are a number of things to consider and these are highlighted below:
Have Counsel review contracts that may be adversely affected
The first recommended step is that companies must engage Counsel, in order to review any contracts that may be adversely affected by coronavirus. This is imperative in determining the rights and obligations of the parties along the supply chain, and any manner in which they may be adversely affected. Some of the factors to be considered are:
- Any consequences that may arise from a breach or default of the contract;
- Any alternative means through which the terms of the contract can be fulfilled, despite the coronavirus outbreak; or
- Any specific terms that will be impacted.
Another important factor, is the laws that govern the contractual relationship between the parties. This is critical in assessing what action to take next. As such, a company must consider the following factors:
- Any choice of law clauses contained within the contract;
- In the event that the contract does not contain a choice of law clause, companies must engage Counsel in order to determine the applicable law. There are a number of factors that will determine this and Counsel can advise on this.
Once the applicable law is decided, it is important to assess the impact of the law on the key terms in the supply contracts. For example, can the parties be absolved of their responsibilities under the contract, due to unforeseen circumstances such as coronavirus? In the Republic of Zambia, the doctrine of “frustration” may apply in the event that adverse circumstances render the contract impossible to perform.
Check if other laws may be applicable
Supply contracts invariably concern the supply of goods. As such, there must be compliance with existent statutes and regulations applying to commercial contracts in the Republic of Zambia. This includes the Sale of Goods Act, 1893. They may also wish to look at any regulations requiring action in the event of an outbreak. This would include the Public Health Act, Chapter 295 of the Laws of Zambia and the Animal Health Act, 2010 in case of declarations concerning zoonotic diseases.
Some losses may be covered by insurance or other indemnification agreements. Parties to a contract might wish to consider any potential insurance coverage for business interruption. They may also wish to look into any other ways in which they can be indemnified. They can then proceed to notify any insurance companies of any policies that may apply to this particular situation.