The recent oil crisis, driven by rising tensions in the Middle East and the closure of the Strait of Hormuz, is hitting the UK manufacturing sector hard. Energy intensive industries face soaring operational costs, with electricity up 70 percent and gas up 60 percent compared to pre crisis levels. This is leading to reduced investment and potential job losses. At the same time, supply chain disruptions and higher raw material costs are adding to inflationary pressures, challenging competitiveness across the sector.

If you run a manufacturing business in Yorkshire, you are already feeling the impact. But beyond immediate financial strain, this crisis is quietly increasing commercial and legal risks that can catch even well run businesses off guard. Here are the key contractual issues you should be thinking about now.

Can you pass rising costs on to your customers?

The first question most manufacturers ask is whether they can recover higher energy and raw material costs from customers. The answer depends almost entirely on your contracts. Fixed price agreements common in manufacturing can leave you absorbing significant losses with no legal route to recover them. If your contract includes a price variation or cost escalation clause, you may be able to adjust prices—but only if you follow the correct process and can evidence the increase. If no clause exists, renegotiation is often the most practical option, even though it may be a difficult conversation.

Force majeure: does it apply here?

You may have heard the term force majeure. Most commercial contracts include a clause that excuses a party from performing obligations when extraordinary events beyond their control make performance impossible or unlawful. Courts interpret these clauses narrowly. Simply being more expensive to perform is usually not enough. You typically need to show that performance has become genuinely impossible, not just harder or less profitable. If a supplier is invoking force majeure to justify non delivery, check their contract carefully. If you are considering invoking it yourself, seek legal advice first.

Frustration of contract

Where no force majeure clause exists, the common law doctrine of frustration may apply. This covers situations where a supervening event makes the contract radically different from what was agreed, through no fault of either party. The threshold is high, but in extreme supply chain disruptions it can be relevant. If a contract is frustrated, both parties are discharged from future obligations. Outcomes can be unpredictable, so it is not a step to take lightly.

Protecting your business: practical steps now

Whether dealing with supplier failures or customer demands, the most important action is to review your existing contracts. Understand what protections or risks are already in place. For new contracts, include price adjustment mechanisms, longer lead times, and clearly drafted force majeure clauses that reflect current realities. Keep detailed records of all cost increases and correspondence with suppliers and customers about the crisis. This evidence is vital if a dispute arises.

Do not wait for disputes to escalate

Early legal advice can save time and money. If a supplier cannot deliver or a customer refuses a price increase, acting quickly with the right legal strategy gives the best chance of a sensible outcome through negotiation, mediation, or if necessary, litigation.

If you would like advice on managing rising costs, supply chain risks, or contractual disputes, we’re here to help, get in touch with Dorrien Peters at DorrienPeters@schofieldsweeney.co.uk.

This article appeared in The Yorkshire Post on 20th March.