suppliers, maintenance companies, tradesmen and so on, they are legally required to perform their respective obligations. If they fail to do so the party not in default could in theory seek damages for breach of contract. Alternatively, there may be cases where the non-defaulting party could terminate the contract on the basis of a fundamental breach. There are some exceptions which might relieve the parties from a contract. The two most notable are force majeure and also the doctrine of frustration of a legal contract. A force majeure is an unforeseeable circumstance that might prevent someone from fulfilling a contract. Some contracts will contain a force majeure clause – these will vary from contract to contract and will need to be looked at by lawyers on a case by case basis, to establish whether this pandemic is covered.

The party that wants to invoke a force majeure clause has to show that the force majeure event has prevented or hindered that party from performing its part of the contract. So there is no absolute right to withdraw from contractual obligations just because a force majeure clause exists. There may well be a spike in litigation in the coming months between parties should one of them seek to invoke a force majeure clause but the other disagrees. The second doctrine is that of legal frustration. This is a common law doctrine which allows a party to be relieved of its obligations under a contract if it becomes physically or commercially impossible to perform the contract.

Again, this is not a doctrine that easily

There is no absolute right to withdraw from contractual obligations just because a force majeure clause exists

grants relief to a party that wishes to withdraw from its contractual obligations. If performance is completely impossible because of a government lockdown, however, then this could be a situation where frustration applies. However, the rights to invoke force majeure clauses or frustration are by no means clear cut.

Maintaining good governance There are other areas where on a practical level care home operators could be affected by the coronavirus pandemic. Some care homes are run by individuals who are sole traders or a group of individuals or family members as partnerships, but many will be run as limited companies.

Should directors’ board meetings be delayed or carried out via video link, assuming this is permitted? Should annual general meetings (AGMs) be delayed or postponed on the basis that it could be completely reckless to hold AGMs that might involve very large gatherings of shareholders?

One could encourage proxy voting or establish an online forum for questions raised by shareholders. The company’s articles of association would have to be consulted to see the extent to which delaying an AGM is possible or to see whether it is possible to have shareholders taking part via electronic means.

There are, of course, many care home operators which are also registered charities, regulated by the Charity Commission. The Charity Commission recently issued guidance which was criticised because it suggested that charities might need to make a report to the regulator of a ‘serious incident’ if they were seriously impacted by Covid-19. If such advice were to be followed, it is arguable that almost every charity in the country would have to make such a report if the charity thought it expected to stop all or a significant part of its work due to Covid-19, as this would have a serious impact on the charity’s work and operations. Indeed, within a day of issuing its guidance the Charity Commission changed its advice on ‘serious incident’ reporting and it now simply urges charities to check the latest advice from Public Health England.

The Charity Commission also issued guidance to help with the running of charities during the pandemic that also deals with postponing or cancelling AGMs and other critical meetings. It advises charities must record the decision to postpone or cancel an AGM in order to demonstrate good governance of their charity. That applies in particular regard to the cancellation of an AGM, as this might make it difficult for the charity to finalise its annual reports and accounts. Meetings should also be held by video, teleconferencing or on the internet, instead of face-to-face but again the charity would need to check its governing document to see whether such meetings are permitted. If not, then it may be necessary to amend the charity’s governing document to allow such meetings.

Financial guidance and support The Charities Commission has also published guidance to charities on how to manage their finances during the Covid-19 outbreak by considering the charity’s short, medium and longer term priorities.

The guidance urges charities to amend financial planning if necessary and consider whether projects, spends or activities should be stopped or delayed so that the focus is on essential spending. Reserves can be spent to help cope with the crisis. If reserves are to be

May 2020 • 15

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