Review your commercial contracts if your business is affected by the HGV driver shortage

By Wright Hassall LLP
schedule10th Nov 21

As many retailers enter the peak Christmas season, the perfect storm created by the  HGV driver shortage continues to wreak havoc across the UK’s supply chains.

If your business is affected by the HGV driver shortage, it is important to review your commercial contracts to see who bears responsibility, says commercial contracts and logistics lawyer Patrick McCallum of Wright Hassall LLP.

What has caused the HGV driver shortage?

There are a number of factors at play, and this is why the problem is so difficult to solve. These include:

  • COVID 19 – whilst the rules have been changed so that double-vaccinated drivers no longer have to isolate if they are “pinged” for being in contact with a person testing positive, there is still the potential for disruption and delay due to drivers having to follow stringent COVID 19 protocols (and of course if they themselves test positive for COVID 19).
  • Brexit – many drivers from the EU find themselves no longer eligible to work in the UK or have left their job because, post-Brexit, they no longer feel welcome in the UK. Whilst the UK government has launched a scheme which offers to issue up to 5,000 temporary visas to overseas drivers in order to remedy the situation, take up has been very low thus far.
  • IR35 – many HGV drivers are engaged by 3PLs as independent contractors for tax purposes. Changes to the IR35 rules mean that employers are now responsible for deciding whether any driver is truly an employee or independent contractor. This has resulted in a number of 3PLs having to re-categorise some drivers as employees and deducting the additional employee tax liabilities out of the driver’s charges, thus making it no longer commercially viable for the driver to continue working.
  • Working conditions and pay – the pandemic has been a time where many of us have reassessed our work/life priorities, with a number of drivers deciding they want to pursue a career with better hours, better pay and without the prospect of sleeping in a layby.

How has the HGV driver shortage impacted businesses?

The lack of HGV drivers has caused significant delays to the delivery of goods. Businesses from numerous sectors who rely on their goods being delivered on time, either to their customers and/or their warehouses for onward sale, have been significantly impacted by these delays.

The costs suffered by businesses as a result of such delays can arise in many ways, whether that be failing to meet their clients’ delivery deadlines, having to issue refunds to consumers and/or paying demurrage (this is a charge levied against goods which become stranded at port and which are not unloaded within the agreed time periods).

Likewise, as 3PLs fail to meet delivery deadlines and provide a satisfactory level of service, they risk incurring significant liabilities for breach of contracts, losing key clients and suffering damage to their commercial reputation.  

Can the parties’ commercial contracts clarify who is responsible?

Ultimately, responsibility for losses incurred by any business as a result of the HGV driver shortage will depend on the terms of its commercial contracts and the individual circumstances of any case.

A number of provisions will need to be borne in mind, such as:

  • Service Levels / KPI’s
    • in respect of a contract between a client and a 3PL, whether there are any service levels/KPI’s that a 3PL must comply with.
    • what remedies are available to a client if its 3PL fails to meet service levels. For example, the 3PL could be required to pay service credits, or the client could be entitled to withhold payment, withdraw exclusivity and/or terminate the contract.
    • what levels of service level non-compliance will trigger such remedies – often a more extreme remedy like termination is only available where there is a critical service failure.
  • Delivery Provisions
    • in respect of a contract between a buyer and a seller, who the contract states is responsible for arranging delivery of the goods and at what stage risk and responsibility transfers from the seller to the buyer.
    • what remedies are available to the buyer for late delivery or non-delivery. These could range from a right to claim damages, reject the goods, have replacement goods delivered for free and/or a right to terminate the contract.
  • Liability Caps
    • the presence of any provisions which exclude or place a financial cap on its liability to the other party, notwithstanding that a party may be responsible for a particular loss under a contract.
    • the size of any such financial caps on the parties’ liability under the contract. This is a question for the parties to agree at the outset of the contract. Depending on the balance of negotiating power, one party could significantly limit the size of any claim the other party is able to bring against it.
  • Insurance
    • what types of insurance the parties are required to take out under the contract.
    • the extent of any such insurance coverage the parties take out (both in terms of scope and financial caps).
  • Termination
    • in what circumstances either party can terminate the contract and on what period of notice.
  • Business Continuity & Disaster Recovery
    • whether the contract contains any provisions which set out what a supplier must do to ensure continuity of service when it is faced with a situation where it is finding it difficult to perform its obligations.
  • Brexit Clauses
    • whether the circumstances trigger any Brexit clause in the contract, allowing the parties to renegotiate the terms of the contract (such as the price) and/or terminate. Given the HGV driver shortage has been caused by a number of factors and not just Brexit, it may be difficult for a party to rely on a Brexit clause, but this will ultimately depend on the drafting used.
  • Force Majeure
    • whether the contract contains a force majeure clause which absolves a party from any liability it incurs towards the other due to an event beyond its reasonable control.
    • whether the term “force majeure event” is defined so as to specifically include or exclude driver shortages or other failures to perform by subcontractors.
  • Material Adverse Change
    • whether the contract allows the parties to renegotiate terms where there is a material or major adverse change that impacts performance of the contract and if so, what circumstances must occur for such clause to be triggered.


The HGV driver shortage is a complex problem and there are no easy short-term solutions to resolving this crisis. However, knowing where you stand as a business under those commercial contracts which have been affected by the driver shortage can bring certainty and potentially the opportunity to offset some of your losses against the other party.

If your business has been affected by the HGV driver shortage, please contact us if you would like us to review your commercial contracts and advise you where you stand.

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