17 November 2022
The FIFA World Cup is kicking off in Qatar on 20 November with the final being set for just a week before Christmas. The World Cup historically takes place during the summer, however, due to heat concerns in the host country, has been rescheduled for the cooler winter on this occasion.
Such unique timing, overlapping both Black Friday and Cyber Monday in the run-up to Christmas, may well bring tidings of joy for retail businesses in the U.K., with Qatar, calculated by Bloomberg to make $20 billion off the event, not being the only giftee this holiday season.
It’s beginning to look a lot like Christmas
Both Currys, British electrical retailer, and John Lewis, British department store chain, have revealed that they’re anticipating surges in TV sales in the coming months, as well as in other areas of technology such as projectors and sound systems, with the two biggest drivers of TV sales (Christmas and the World Cup) culminating in an England match on Black Friday.
Big sales are also expected in groceries, with both celebrations of Christmas and football focusing largely on food and drink. Waitrose, British supermarket chain, confirms that their Christmas food lines are designed with both festive and football audiences in mind, and has brought festive food and drink sales forward (the chain revealed their Christmas range in August) to manage increased sales.
Retailers and suppliers should be preparing for demand, therefore, ensuring supply contracts are negotiated, agreed and in place as soon as possible, as well as reviewing any already in place.
Indemnity clauses
A contentious part of most supply contract negotiations is the indemnity clause.
An indemnity is a promise by one party (the indemnifying party) to reimburse the other party (the indemnified party) for its financial losses if a trigger event occurs. The promise is made when the parties agree that it would be unfair for the indemnified party to bear the resulting losses.
Indemnity clauses should be tailored to the specific supply contract, and both parties should consider the following when drafting:
- Trigger
The event that triggers payment must be clear. This is usually an event over which the paying party has control, so that it is fair for the liability to sit with them. The indemnifying party may want to negotiate excluding events outside of their control, or for which they are not to blame. For example, an act of God, or a loss caused by the other party’s negligence.
- Loss
The loss needs to be quantifiable. A well-negotiated indemnity should balance both parties’ interests. For example, the indemnifying party may want the loss to be covered by their insurance, and the indemnified party may want to cover a specific loss in full. Sometimes, the amount to be paid cannot be known until the indemnified party’s liability is assessed in court (e.g., where the indemnity uses the word ‘claims’, ‘damages’ or ‘judgment’.
- Causation
Often, the indemnifying party’s duty is to pay for loss directly and solely caused by the trigger. A wider or narrower casual link may be negotiated, however. For example, “in connection with”, may be interpreted as the widest causal link between trigger and loss. The contract may also state that the loss has to be ‘foreseeable’.
- Mitigation
If the indemnity relates to reimbursement of damages (e.g., for breach of contract) the protected party usually has a duty to mitigate their losses. However, indemnities can be drafted to avoid this duty to mitigate.
- Proof of loss
The indemnified party must prove what payment is due under the contract. This normally involves providing the fact and amount of the loss specified in the indemnity. Express wording can be negotiated, however, to depart from this. For example, the parties may negotiate that the indemnified party’s statement of the amount due will bind both parties.
- Exclusion of other claims
A party might indemnify another against loss arising from the indemnifying party’s breach of contract. The indemnifying party may also be liable to pay damages for that breach of contract. The contract should state whether the indemnified party may pursue only one claim, or both claims in the alternative, although there will be no double recovery.
- Capping liability
The parties to a contract may agree a ‘limitation of liability’ clause which limits their maximum potential liability to the other party. The parties need to decide whether the indemnity is included under this cap or not. It is common for liability under indemnities to be uncapped.
Because indemnities are very onerous clauses, they are ‘strictly interpreted’ by the courts. This means that there is less leeway if the indemnity is poorly worded, and it is important to get it right.
Don’t get caught in the cold
For help and advice on supply contracts, to include indemnity clauses, please contact our commercial team by calling on 020 3814 2020, emailing us at enquiries@blasermills.co.uk, or filling in our contact form.
*Please note that this article does not constitute as legal advice and should not be taken as such*