Can this contract be enforced? Coronavirus issues

[hello405]

My partner is a sole trader food vendor at various local markets that were shut down in March due to coronavirus. He has a 6-month contract for a kitchen rental that he started in February. They have let him "delay payment" until "things got back to normal," but now with the notification that markets can open up next month, they are demanding payment. The thing is, he doesn't have the money, and he's probably not going to have it anytime soon because although markets are legally allowed to open, most of them are not re-opening because they were set up for office workers to lunch at and those office workers are no longer there. So things are definitely not back to normal!

Is there anything he can do? What will happen if he just doesn't pay? And, does he really have to pay for the 2 months that he was forbidden from entering the kitchen rental due to lockdown regulations?

[hello405]

Here's a copy of the contract. We found the CMA regulations that would suggest he doesn't have to pay for the months he wasn't able to use the kitchen, but the regulations are for consumers and is my partner, as a sole trader, considered a business? Please please give us some advice, the guy is charging an extra £40 every 5 days because we cancelled the direct debit.

Is it also significant that every page of the contract they sent us is signed except for the page about terminations, which is unsigned?

R0b?

[R0b]

Those terms are absolutely terrible and I have no idea why someone would sign up to them but there we are.

Think the first point is whether he is a consumer, and if I remember rightly, the Consumer Rights Act 2015 treats sole traders as a consumer for these purposes. Therefore he might be able to take advantage of those provisions, and in particular, unfair contract terms that these charges are penalty charges and thus not enforceable.

The other thing to consider here is that there is no variation clause that I could find. Therefore, your partner and the kitchen could alter the contract either verbally or in writing since there is no specific format. You say that they agreed to let him delay payment until everything goes back to normal but that is ambiguous at best.

Does "delay payment" mean he doesn't have to pay for the months whilst lockdown was happening and only restart the payments when it is lifted and he can make use of the kitchen or, does it mean that the contract is extended by the months of lockdown and so payment is effectively delayed. Answer is, I don't know but was it your partner who suggested this or the kitchen?

Also, there is ambiguity with "things back to normal" what exactly does that mean? Either way, if the contract has been varied, they can't unilaterally vary it again without your partner's consent. So things might hinge on the interpretation of "delay payment until things get back to normal."

Seems like charges are capped at £150 per occurrence, which this 'event' might be considered an occurrence and therefore capped at £150 in this instance. Failure to pay suggests that they can terminate and take the deposit as compensation, or in the policy section take the deposit as compensation if you don't pay those direct debit charges within 3 days.

They could then sue your partner for the remainder of the balance but I guess you wouldn't know their appetite until you got to that stage. I would say though, that these charges on the face of it look absolutely like aggressive penalty charges and I would think there's a reasonable chance you could argue that in court, if it went that way. Also, your reference to the CMA, since your partner could rely on the Consumer Rights Act then the CMA guidance is a useful starting point for unfair contract terms, especially their examples.

Sadly, the contract is poorly drafted in places it's difficult to really say how it would go, but if they terminated the contract and were found by a court that they weren't entitle to terminate in that particular way, then your partner could counterclaim for wrongful termination and get out of liability.

[hello405]

Thank you for your help. We both really appreciate it!

Think the first point is whether he is a consumer, and if I remember rightly, the Consumer Rights Act 2015 treats sole traders as a consumer for these purposes. Therefore he might be able to take advantage of those provisions, and in particular, unfair contract terms that these charges are penalty charges and thus not enforceable.

This is the page in particular that I am talking about, that says:

Where a consumer receives regular services in exchange for a regular payment as part of an ongoing contract, the CMA considers that consumer protection law:
will normally require the consumer to be offered a refund for any services they have already paid for but that are not provided by the business or which the consumer is not allowed to use because of Government public health measures (this may be a partial refund of the total amount the consumer has paid, to reflect the value of the services already provided);
will normally allow the consumer to withhold payment for services that are not provided by the business or which the consumer is not allowed to use because of Government public health measures;

However, my partner sent this to the owner and he said "this doesn't apply to you, you're not a consumer." I am afraid that he's correct, but I can't find anything about a sole trader being considered an individual.

Seems like charges are capped at £150 per occurrence, which this 'event' might be considered an occurrence and therefore capped at £150 in this instance. Failure to pay suggests that they can terminate and take the deposit as compensation, or in the policy section take the deposit as compensation if you don't pay those direct debit charges within 3 days.

Which event are you talking about? ("this 'event' might be considered an occurrence") as in, not paying or cancelling the direct debit? I don't think they will terminate the contract because they will have no one else renting the kitchen and they will want the contact to play out to the end so my partner will owe as much as possible.

They could then sue your partner for the remainder of the balance but I guess you wouldn't know their appetite until you got to that stage. I would say though, that these charges on the face of it look absolutely like aggressive penalty charges and I would think there's a reasonable chance you could argue that in court, if it went that way. Also, your reference to the CMA, since your partner could rely on the Consumer Rights Act then the CMA guidance is a useful starting point for unfair contract terms, especially their examples.

My partner proposed not paying for the two months that he wasn't able to access it, April and May, and resuming payment at full price for June. They want him to pay full price from June but also £200 each for April and May. The owner of the business has already threatened to send it to a collections agency, as well as charging him £40 every 5 days for cancelling the direct debit.

[R0b]

However, my partner sent this to the owner and he said "this doesn't apply to you, you're not a consumer." I am afraid that he's correct, but I can't find anything about a sole trader being considered an individual.

Yes, I'm afraid the owner is right, forget what I said I was thinking about another piece of legislation where a sole trader is considered a consumer. Your partner doesn't fall within the definition of consumer based on this scenario.

Which event are you talking about? ("this 'event' might be considered an occurrence") as in, not paying or cancelling the direct debit? I don't think they will terminate the contract because they will have no one else renting the kitchen and they will want the contact to play out to the end so my partner will owe as much as possible.

Yes, the event of not paying could be considered an 'occurrence' and therefore charges capped at £150.

My partner proposed not paying for the two months that he wasn't able to access it, April and May, and resuming payment at full price for June. They want him to pay full price from June but also £200 each for April and May. The owner of the business has already threatened to send it to a collections agency, as well as charging him £40 every 5 days for cancelling the direct debit.

If it was agreed that he wouldn't pay for the two months, then that would likely be binding, he will need to evidence that position though, and if this was all talked about verbally then your partner will be in a weak position - a case of he said she said. Debt collectors have zero powers other than bombarding you with letters, about as harmful as a fly.

Either you argue the toss and call the owner's bluff, see what he does or try to come to some mutual arrangement. At the end of the day if your partner doesn't have the money then it's pointless of the owner to pursue your partner as he will be throwing good money after bad. There is a clause in the contract that can be terminated by mutual agreement, so you can try to reason and see if the owner wil laccept the deposit as compensation and both sides walk away.

Otherwise, if this drags out another month your partner could give notice to terminate the contract with 1 months' notice (giving notice on 28 July) to terminate the following month. Owner can't stop you, unless he terminates first but either way, will be inthe same position of having to pursue your partner which might not be worth it in the end.

Future tip for your partner: read the terms carefully and know what you are signing up to or otherwise negotiate as these are shockingly bad.

[hello405]

Thank you, R0b, this is very helpful.

The owner of the business has refused to voluntarily terminate the contract, and there was no agreement that my partner would not pay for April and May, so he's pretty screwed there.

So, my remaining questions -- the owner sent us a copy of the contract in which my partner had initialed every page EXCEPT page 4, which is the page with the termination agreement. To me, this appears that the owner switched out the page my partner actually signed and inserted a new one with less favorable terms. Is the termination agreement still valid if the page had not been initialed? (There is a spot to for it to be initialed and every other page was).

Is there any other way of getting out of paying the entire contract through the end date in August? It appears not, but I wonder if we're better off letting him take it to collections and then contesting it with the collection agency that the debt wasn't valid because of the missing page of the contract.

It does seem sort of unfair that my partner isn't covered by consumer protections, but then the debt will still go on his consumer credit report, but that's neither here nor there, I suppose.

[R0b]

So, my remaining questions -- the owner sent us a copy of the contract in which my partner had initialed every page EXCEPT page 4, which is the page with the termination agreement. To me, this appears that the owner switched out the page my partner actually signed and inserted a new one with less favorable terms. Is the termination agreement still valid if the page had not been initialed? (There is a spot to for it to be initialed and every other page was).

Don't even bother with that argument, a contract doesn't need to be signed on every page to be binding unless the contract states. I think it would be sufficient that the initials on the other page would be an indication it was agreed to. Unless your partner can show the page has been switched out and there is some element of fraud, I don't think that argument will float at all.

Is there any other way of getting out of paying the entire contract through the end date in August? It appears not, but I wonder if we're better off letting him take it to collections and then contesting it with the collection agency that the debt wasn't valid because of the missing page of the contract.

Can't see a way out of not paying, and just because your partner signed up to a bad bargain is no excuse either.

It does seem sort of unfair that my partner isn't covered by consumer protections, but then the debt will still go on his consumer credit report, but that's neither here nor there, I suppose.

That's part and parcel of doing business. On the flipside, one could argue that your partner should have read and negotiated the terms with the owner and if he didn't like the terms, he was free to walk away. If your partner wanted to avoid any negative entry on his report, he should have set up a limited company and entered into the contract on behalf of the company, that would have kept it at arms length and the adverse entry would have applied to the company, not personally on your partner.

It's unlikely the debt will go on your partners credit file, I highly doubt the kitchen owner will be registered with credit reference agencies to report debts and even then, he may have needed consent to do so. Obviously if the matter goes to court and judgment is obtained your partner has one month from the date of judgment to raise funds and pay it off without having the CCJ recorded on his credit report.

[hello405]

Point taken about the contract terms. He feels very badly about it now. He does remember initialing every page but now the page with the terminations clause is not initialed, but he didn't get a copy at the time so there's nothing he can do about that now.

At the end of the day, he's a sole trader and makes very little money, hasn't been able to operate at all since March, but is still held to this contract for a kitchen rental that he only used for a few weeks and despite not being able to enter said kitchen for more than two months due to government guidelines. It sounds like he might be best waiting to see how some of these other "frustrated" contracts are resolved--I wonder how they will be enforced without all small businesses going out of business (or maybe they all will). He doesn't have the money to pay it anyway, and the owner is not willing to negotiate beyond threatening and piling on additional fines, so it doesn't seem like my partner really has a lot of options available to him other than to wait and see what happens.

[R0b]

I'm afraid that is what you might have to do, and hope that if the owner does terminate, he doesn't it properly or in accordance with the contract and only then might your partner have grounds for wrongful termination and perhaps get out of it that way.