Extreme snowfall raises legal stakes for small food manufacturers

Eversheds partner Ruth Connorton told FoodManufacture.co.uk that “you would expect force majeure ​[‘superior force’] clauses to exist in contracts”​ between food manufacturers and customers, to protect the former against legal action in the event of extreme weather conditions affecting their ability to fulfil supply contracts.

Nonetheless, she said that the protection such clauses offered differed according to whether the contract was drafted with a “customer or supplier bias”​ in mind, given that force majeure​ clauses excuse all or part of the obligations of one or both parties.

Major players hold aces​

“Obviously it depends on bargaining power, and major players will try to carve weather: wind, rain, snow, out of the equation to guarantee supplies, ​said Connorton. “Although as always, such clauses only come into effect when things go wrong.​

“Generally though, in the case of extreme events – say a Meteorological Office severe weather warning – it is accepted that no-one is to blame legally in the case of non-performance, and we all do our best to carry on. ​

“You can’t be sued in such a case – provided that as the supplier you contact the customer and invoke the force majeure clause.” ​However, Connorton did agree that in such cases unforgiving customers might steer clear of certain suppliers in future if they suspected negligence.

Transfer of title​

Given that force majeure ​clauses provide a complete legal defence when invoked reasonably, Connorton said a more pressing issue for food manufacturers was when contracts stipulated fulfilment, the point at which ownership or title transferred from supplier to customer, which usually occurs prior to payment but does necessitate it.

She explained that when drawing-up agreements, “as with all contracts, the advantage lies with the party​ who has the bargaining power”​, and insisted that in such cases the major retailers, for instance, hold all the aces.

Particular risk categories for food manufacturers during times of extreme weather included high-volume fresh produce, since producers faced losing out financially if goods spoiled before title was transferred, or were not paid because they were adjudged not to have supplied goods either at all, or in insufficient quantities.

“Anything with a short shelf-life presents difficult issues, and from a supplier’s viewpoint a lot depends on when title transfer occurs,” ​said Connorton. “If it occurs when a food manufacturer loads produce onto a lorry, it’s the customer’s problem. Alternatively, title transfer might only occur when it reaches the store.”​

Supermarket viewpoint​

Tesco declined to comment on how force majeure ​clauses were written into supply contracts, and whether Tesco was sympathetic when suppliers were unable to fulfil orders due to force majeure.​

However, a spokesman said contingency plans were in place to cope with severe weather: “We have a very positive relationship with suppliers and work constructively with them to ensure that they can cope, to ensure continuity of supply. Moreover, we have contingency plans in place when severe weather strikes. For instance, we can easily alter the way our stock ordering system works.”​

Outlook for food manufacturers​

John Freestone, md of Crawley-based convenience food manufacturer Pasta Reale, told FoodManufacture.co.uk that despite temperatures of -10°C this morning and the inability of some councils to clear A-roads for employees to commute, his firm was coping well with the snow.

“There has been some modest disruption to inbound raw material and packaging supplies but stocks are generally able to cover this, so far.​There have been delays of a day or so but generally things are still manageable.”​

But Freestone said road disruption was making outbound deliveries more difficult. “The main issue here seems to be that limitations on driver hours mean that delays on motorways have created backlogs with drivers and vehicles 'stuck' which knocks back on the next shipments.”​

Another food manufacturer who asked to remain anonymous added that stock backlogs at factories could shortly prove an issue if his firm was unable to ship, since production would have to be stopped if too much was held onsite. “We are managing but four more days could create material issues, but as the major roads free up this looks unlikely.”​