Sale of Goods Law and COVID-19: Understanding the Impact on Business

The COVID-19 pandemic has significantly impacted businesses worldwide, and the Sale of Goods Law is no exception. Many contracts have been breached due to supply chain disruptions, and businesses are struggling to navigate these unprecedented circumstances.

Delays in delivery times have become a major issue, with some contracts specifying penalties for late delivery. For example, if a contract states that goods must be delivered within 30 days, but the pandemic causes a 60-day delay, the seller may be liable for damages.

Businesses must carefully review their contracts to understand their obligations and potential liabilities. This includes checking for force majeure clauses, which excuse parties from performing their contractual obligations due to unforeseen circumstances.

In some cases, businesses have been forced to accept lower quality goods due to shortages and supply chain disruptions. This can lead to disputes over the quality of goods and potential breaches of contract.

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Tennessee's Uniform Commercial Code (UCC) plays a significant role in contracts involving the sale of goods, especially during the COVID-19 pandemic.

Companies with contracts governed by the UCC should be aware of the impossibility of performance rule found in Tenn. Code Ann. § 47-2-615, which allows sellers of goods to invoke this rule not to deliver products due to COVID-19.

Sellers can argue that the fallout from COVID-19 was entirely unexpected at the time of contracting, making it impossible to deliver the goods.

The seller must give "seasonable notice" of its decision to delay delivery or not to deliver the goods, as illustrated in the case of Bunge Corp. v. Miller, where the farmer failed to alert the plaintiff about the destruction of the soybean crop until the following February.

This highlights the importance of sellers notifying buyers as soon as possible when delivery of goods is not possible.

To understand the language of Tenn. Code Ann. § 47-2-615, let's break down the two situations that make delivery impracticable:

In the case of COVID-19, sellers may be able to argue that compliance with a “safer at home” or other government order makes delivery impracticable.

The pandemic has caused significant disruptions to global supply chains and logistics networks, resulting in delays and shortages of goods.

Restrictions on movement and lockdown measures have severely impacted transportation capacity, making it difficult to deliver goods across borders.

Parties involved in international sale of goods contracts have faced challenges in meeting delivery timelines and ensuring the availability of goods, which can impact their contractual obligations.

These disruptions have led to difficulties in delivering goods, affecting businesses and individuals alike, and causing financial losses due to delays and shortages.

Carefully drafting and reviewing contractual terms has become crucial in light of the pandemic, with parties paying attention to provisions such as force majeure clauses and insurance requirements.

Parties are now more focused on understanding their respective rights, obligations, and liabilities during challenging situations, thanks to clear and comprehensive contractual provisions.

Renegotiation and alternative solutions have helped parties navigate the uncertainties and maintain their business relationships during the pandemic, with some mutually agreeing to revise delivery schedules or adjust payment terms.

The willingness to find alternative solutions has been a key factor in keeping business relationships intact, even in the face of changing circumstances.

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As a seller, you're likely wondering how COVID-19 will impact your business. If you have contracts governed by the Uniform Commercial Code (UCC), you should be aware of the impossibility of performance rule found in Tenn. Code Ann. § 47-2-615.

This rule allows sellers to invoke the impossibility of performance defense if they can show that delivery of goods is impracticable due to unforeseen circumstances like COVID-19. Sellers must give "seasonable notice" to buyers of their decision to delay or not deliver goods.

The key to invoking this rule is to show that the seller could not deliver due to compliance with a government order, such as a "safer at home" order. The seller must also demonstrate that they acted in good faith and that the non-delivery is part of a good-faith attempt to comply with the order.

Here are the two situations that qualify as grounds for invoking the impossibility of performance rule:

For example, if you're a seller in Tennessee and you're unable to deliver goods due to compliance with Governor Lee's Executive Order 17, you may be able to invoke this rule. However, you must give seasonable notice to your buyers of your decision to delay or not deliver goods.

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The COVID-19 pandemic has accelerated the shift towards digitalization in international trade.

E-commerce has become a crucial aspect of this shift, providing an alternative avenue for parties to engage in trade while adhering to social distancing measures and travel restrictions.

Parties have increasingly relied on digital platforms and online marketplaces to conduct business and facilitate the performance of contracts.

Digitalization has enabled businesses to adapt to the new normal and continue trading despite the challenges posed by the pandemic.

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