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Contract termination due to coronavirus pandemic

Discussion in 'General Business Forum' started by Claudia I, Oct 15, 2020.

  1. Claudia I

    Claudia I UKBF Newcomer Free Member

    6 0
    Hello everyone,
    I would like to ask for your advice regarding a contract I needed to terminate with an online marketing company.
    In June 2019, my husband and I opened a bakery in London. Being an East European comfort food shop in a mostly Asian area it took us quite a long time to penetrate the market. Considering this situation, in January 2020 we accepted the collaboration proposal from a marketing company, which used Instagram influencers to advertise the business. It did not help too much, as only 3 influencers visited us during the first 2 months.
    In March 2020 when the lockdown was imposed, we had to close the bakery. I informed the marketing company about the closure and we decided to pause the contract. However, we reopened the shop in July 2020, but with the schools and offices still closed, we could not meet the ends and we were forced to permanently close at the end of August 2020. We were not able even to pay the rent for the shop, so we used our two months deposit for July and August.
    We did not receive any government grant or business support, as the business rate was included in the rent, so the landlord was the beneficiary of this grant. However, we were required to fully pay the rent of £3000/month during the lockdown, except for April 2020. We also applied for the discretionary grant, which was denied because we sent the lease agreement signed in June 2020, not the one signed in June 2019(we were on a yearly contract).
    During the lockdown, the marketing company contacted me several times to restart advertising the products. I explained that we are still closed and that I will inform them when we reopen.
    As we were forced to cease our activity, in July 2020 I have informed the marketing company and I requested the termination of the contract which was signed in January 2020 for 1 year. They sent me a contract termination confirmation with the date of May 2021.
    I emailed them a few times explaining that the bakery does not exist anymore, so there is no object for the contract, but they keep sending invoices. Moreover, they threaten me with a debt recovery company being involved. I also sent them the eviction notice and the contract termination from the landlord, as they requested it before proceeding with the termination of the contract.
    Any advice or ideas on what to do next is more than welcome.
    Thank you.
     
    Posted: Oct 15, 2020 By: Claudia I Member since: Oct 15, 2020
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    24,866 3,030
    What sort of business was it?

    Limited company? Partnership? Sole trader?
     
    Posted: Oct 15, 2020 By: Mr D Member since: Feb 12, 2017
    #2
  3. Newchodge

    Newchodge UKBF Big Shot Free Member

    14,512 3,896
    Were you actinf as a ltd company or as a sole trader?
     
    Posted: Oct 15, 2020 By: Newchodge Member since: Nov 8, 2012
    #3
  4. Claudia I

    Claudia I UKBF Newcomer Free Member

    6 0
    As a limited company.
     
    Posted: Oct 15, 2020 By: Claudia I Member since: Oct 15, 2020
    #4
  5. Claudia I

    Claudia I UKBF Newcomer Free Member

    6 0
    Limited company.
     
    Posted: Oct 15, 2020 By: Claudia I Member since: Oct 15, 2020
    #5
  6. Newchodge

    Newchodge UKBF Big Shot Free Member

    14,512 3,896
    Then, if the ltd company is coming to an end, so is the contract.
     
    Posted: Oct 15, 2020 By: Newchodge Member since: Nov 8, 2012
    #6
  7. Claudia I

    Claudia I UKBF Newcomer Free Member

    6 0
    Thank you for your answer.
    We do not close the company, just keep it dormant.
    The company is registered with the Companies House under one name and it was trading with a different name. My husband is the sole owner. I was just running and managing it as a family business. I was not employed at the company.
    My worry is that now they want to involve a debt recovery company, even if I told them so many times that the bakery is permanently closed. It does not seem fair to pay for the services we did not receive and we do not need it any longer for the reasons beyond our will or power.
    Could they ask me as a private individual to pay, as I have signed the contract with them?
     
    Posted: Oct 15, 2020 By: Claudia I Member since: Oct 15, 2020
    #7
  8. Mr D

    Mr D UKBF Legend Free Member

    24,866 3,030
    They chase the company for payment. Company pays or not pays based on its circumstances.
    If it has no money it doesn't pay.

    They could go for a CCJ against the company. Company still doesn't pay.
     
    Posted: Oct 15, 2020 By: Mr D Member since: Feb 12, 2017
    #8
  9. Mr D

    Mr D UKBF Legend Free Member

    24,866 3,030
    You signed as a representative of the company?

    Or just signed as yourself?
     
    Posted: Oct 15, 2020 By: Mr D Member since: Feb 12, 2017
    #9
  10. Claudia I

    Claudia I UKBF Newcomer Free Member

    6 0
    As a representative of the company.
     
    Posted: Oct 15, 2020 By: Claudia I Member since: Oct 15, 2020
    #10
  11. The Byre

    The Byre UKBF Legend Full Member

    10,351 4,330
    Close the company - end of story.
     
    Posted: Oct 15, 2020 By: The Byre Member since: Aug 13, 2013
    #11
  12. Mr D

    Mr D UKBF Legend Free Member

    24,866 3,030
    While company is dormant debt still exists.

    Dissolve company and it has no debts.
     
    Posted: Oct 15, 2020 By: Mr D Member since: Feb 12, 2017
    #12
  13. Claudia I

    Claudia I UKBF Newcomer Free Member

    6 0
    The company has no debts apart from this one, which I do not know if can be considered a debt, as no services were provided.
    This is what I do not fully understand. Why the debt exists if they did not provide any services?
    By contract, they should have sent periodically reports and influencers to the bakery. None happened as we were closed.
    We would like to keep the company, as we hope to reopen after things settle. We have all the machinery in storage. We need only the location.
     
    Posted: Oct 15, 2020 By: Claudia I Member since: Oct 15, 2020
    #13
  14. MikeJ

    MikeJ UKBF Big Shot Free Member

    5,856 1,733
    If your company has assets (who owns the equipment?) then they could force you to sell that and pay them, unless you want to challenge their performance in the contract. Without anyone reading the contract, it's hard to know what they actually promissed.
     
    Posted: Oct 15, 2020 By: MikeJ Member since: Jan 15, 2008
    #14
  15. Mr D

    Mr D UKBF Legend Free Member

    24,866 3,030
    It has assets - machinery?
     
    Posted: Oct 15, 2020 By: Mr D Member since: Feb 12, 2017
    #15
  16. Alison Moore

    Alison Moore UKBF Enthusiast Full Member

    641 123
    I'm guessing there is some sort of retainer or monthly fee on the contract, which is why they're invoicing you? As long as the company exists the contract is still valid and whatever you originally signed, will still stand regardless of your businesses situation.
     
    Posted: Oct 15, 2020 By: Alison Moore Member since: Aug 4, 2016
    #16
  17. SillyBill

    SillyBill UKBF Regular Free Member

    263 141
    Completely ignore, they will get bored, if they choose to waste money recovering a "debt" for a service never provided for then they'll soon be out of business too.

    Reminds me of the time I bought a business where I had a fire extinguisher service company (/gouger) try to hold me to a 20+ year old annual service agreement signed by a subsequently dead former director. I'll give the bloke his dues he was persistent to the extent of even turning up months down the line after I had informed him the gouging was up and he was a persona non grata.

    If you are prepared to waste precious time chasing revenue for something where the legal cost of recovering the money makes it a non-starter in itself you really have to question whether the business is up to anything IMO. Usually done by businesses who offer shoddy service in the first place or who can no longer find new clients. If swamped in work you obviously wouldn't be threatening a client who is dissatisfied with your service trying to sever ties, you'd see it as blessing in fact...I do anyway, if someone wants out better to invest the time finding other revenue to replace it 9/10.
     
    Posted: Oct 15, 2020 By: SillyBill Member since: Dec 11, 2019
    #17
  18. obscure

    obscure UKBF Ace Free Member

    3,319 851
    You closed your company and by doing so you prevented them from fulfilling their obligations. Under contract law, if you, through action or inaction, prevent the other party from fulfilling their obligations then they are still entitled to payment under the contract.

    There is also the possibility that the wording in the contract is such that you are paying for access to the service and if you (for whatever reason) do not use it, you still have to pay.
     
    Posted: Oct 15, 2020 By: obscure Member since: Jan 18, 2008
    #18
  19. Mr D

    Mr D UKBF Legend Free Member

    24,866 3,030
    Business dealings generally are based on contracts.
    Being closed was not their fault - and contracts for services tend to have a clause regarding cancellation.
    Not up to them to cancel, it's up to the company to tell them.

    Common for cancellation to require time - have heard of 5 year contracts for some stuff. Big contracts can be decades!
    If the service is not cancelled then expect payment to be chased.

    Read the contract. They can use it against the company, the directors can use the contract against the service supplier too.
     
    Posted: Oct 15, 2020 By: Mr D Member since: Feb 12, 2017
    #19
  20. paulears

    paulears UKBF Big Shot Full Member

    4,525 1,193
    I doubt courts will be sympathetic to anyone wanting to enforce contracts that the epidemic has made impossible, let alone unreasonable. One of my contracts signed and essential done and dusted was cancelled with a sad note detailing the 'cancellation of contract 12345'. There are a few lines of small print that could be 'pulled' towards a reason for cancellation, but none of them really hit the mark, but I always do my Judge Judy consideration. They'd say the event never happened because the venue was closed by the Government, it's totally out of our control. I'm sure Judge Judy would think that reasonable, and frankly I do too. Many people cannot pay. Courts seem to look closely at people who can, but won't. Most solicitors advise checking to see if the other party has the ability to pay before taking action. Even idiots are starting to realise that many businesses really don't have any money coming in, and it's not just hype.
     
    Posted: Oct 22, 2020 at 7:35 AM By: paulears Member since: Jan 7, 2015
    #20