5 June, 2020
The Covid-19 pandemic and associated “lockdown” has hit the UK economy hard with certain businesses unable to trade at all, whilst others have abruptly lost their traditional customer bases. This applies none-more-so than in the food and drink sector where the production and supply of goods has been largely unaffected but their routes to market, including supplying to restaurants, bars and wholesalers, have been cut off or substantially reduced.
In addition, restaurants and bars, who are yet to be given the green light to even think about reopening their doors, are having to find creative ways to continue to trade with their customers whilst complying with the government guidance surrounding social distancing and health and safety.
Many within the food and drink sector have therefore made the decision to take their offering directly to end-user customers which for some within the industry has caused a shift away from their usual business to business trading.
In law, consumers have enhanced statutory rights and where business to consumer trading is not a business’ usual way of operating, some may fall foul of consumer laws. In addition, a large number have shifted focus to increase their online presence and have been conducting digital marketing campaigns, alongside website and social media revamps. Therefore, they need to also consider data protection and privacy, electronic communications legislation and regulations, especially when it comes to contacting existing and/or new customers.
Where food and drink businesses have made changes to their more traditional ways of trading, they should be mindful of the following:
At some point, restaurants and bars (and other business that are currently closed) will reopen. Food and drink businesses with a contract to supply these entities need to be mindful that, unless their contract with the closed business has been terminated, frustrated or you have agreed some form of suspension of contract with that customer, you will have to meet your contractual obligations again in the future.
Whilst survival is key at the moment and diversifying is important, this should not be done to a degree that you may fail to meet any future contractual obligations owed to your existing customer base. Failure to meet future obligations could lead to breach of contract claims which could result in an order for damages against your business.
The sale of goods on a business to consumer basis is subject to a higher degree of regulation than supplying goods on a business to business basis. Consumers benefit from an increased right to transparency of contractual terms, specific pre-contractual information, enhanced cancellation and return rights and there are many provisions that may be acceptable in a business to business contract that would be deemed unfair within a business to consumer contract.
Therefore, any business who does not usually sell on a business to consumer basis and is now looking to sell their products directly to end-users should review their terms and conditions and contractual provisions to ensure that any necessary adjustments are made to ensure they comply with the various consumer contract laws and regulations. The adjustments to be made will also vary depending on whether you are selling to consumers onsite at the business’ premises or via some form of online or distance selling method.
Regardless of the type of website operated, whether it is for advertising goods only or is in fact used to take and conclude orders for goods and/or services, there are certain rules that business owners will need to adhere to. One of the most basic of requirements is the disclosure of certain information about your business i.e. name, registered company number, registered office address, contact information and VAT number.
A business may be tempted at this time to drum up as much business as it can by sending marketing to its existing database of customer contacts and/or otherwise undertaking specific advertising campaigns.
Where advertising/marketing is individually directed to customers such as emails, it will be subject to a variety of specific direct marketing rules under data protection and privacy legislation. This includes the obligation to obtain certain consents for marketing which must be in a specified format and obtained prior to any marketing activity.
The content of direct marketing will also be subject to the same rules as other advertising and marketing and there are a number of other regulations and codes in addition to the well-known data protection and privacy legislation that must be considered to ensure that the advertising is appropriate, not misleading, not discriminatory etc.
There are a variety of sanctions such as fines that may be imposed for breach of the various regulatory requirements with different enforcement bodies depending on the breach in question. For example The Information Commissioner’s Office is the entity responsible for enforcing data protection and e-privacy law in the UK whereas Trading Standards may take action for breach of consumer and E-Commerce regulations.
Consequently businesses should ensure that all relevant regulatory requirements have been checked before carrying out any form of marketing/advertising campaign to avoid being caught out by the various rules.
We are also aware that there has been significant noise, both locally and nationally, within the food and drink sector with regard to the best way to approach landlords in relation to rent payments in situations where a business is struggling, especially in those businesses whose rateable value means they are not eligible for certain of the government assistance schemes or grants.
Whilst the government has brought in statutory protections with regards commercial evictions (currently until 30 June 2020, but it is expected that this date will be extended), this does not provide tenants with a carte blanche right to choose not to pay their rent.
Where payments are missed, the tenant will still be liable for the missed rent payment and the legislation only protects the tenant from being evicted purely on the basis that they have missed payment due to the pandemic. Further, tenants could be required by their landlords to pay a penal rate of interest on any rent arrears.
Our strong advice is to speak with your landlord to agree a way forward, either in terms of a rent break, rent reduction or deferral of rent, so that both parties have a clear understanding of their respective positions.
Any agreements reached in this regard should be documented and signed by both landlord and tenant. This is particularly important if you have a break option in the lease which is conditional on the payment of the rent. If you have not reached an agreement with the landlord, and there are still rent arrears at the relevant break date, then the landlord may refuse to accept that the break has been effective, and the lease will therefore continue.
Further, even if you have paid all the rent arrears by the break date, the landlord could still be entitled to charge interest on those arrears even if they have not previously demanded payment of the same. If your break is conditional on the payment of all rents due, and interest is charged as rent under the terms of the lease, the landlord could refuse to accept the break due to the non-payment of such interest.
If you have any questions regarding the impact of the Coronavirus upon your business or are seeking up-to-date legal advice on Company & Commercial matters, contact Shaun Guppy on 01202 294 566 or email ShaunGuppy@steeleraymond.co.uk.
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