COVID19 CONTRACT ASSESSMENT CHECKLIST
As businesses reopen after a long COVID quarantine, owners should ask themselves if their contracts adequately protect them in this brave new world. Whether it is a master services agreement, operating agreement, or a commercial lease, every business should consider revising their contracts to minimize their risk because the cost of dealing with a breach of contract claim in a lawsuit, arbitration, or mediation could be a costly endeavor.
The following questions are designed to help evaluate basic contract terms that might be impacted by COVID19 or another pandemic in the future.
DOES THE AGREEMENT CLEARLY DEFINE THE TERM? IF/HOW THE PARTIES CAN TERMINATE?
Does the agreement clearly establish the duration of the contract (aka the "term") and how it renews (if at all)?
Does it explain whether the contract term is extended to account for any force majeure period during which it is impossible for one or both parties to perform?
Does the agreement direct how one or both parties may terminate the contract (if at all)?
Does it require the terminating party to provide sufficient notice to end the contract?
WHAT HAPPENS IN THE EVENT OF ANOTHER GOVERNMENT SHUT DOWN?
Does the contract contain a force majeure clause which directs how performance may be delayed or excused in the event of another government shutdown? Many business owners assume that the inclusion of the term "Act of God" in a force majeure clause covers a pandemic related shutdown but that issue is currently being litigated and without judicial guidance on that point it would be easier to just draft around it.
Does the agreement acknowledge that your business can perform through remote means? Does it afford you the necessary time and flexibility to seek alternate performance if the other party is unable to satisfy the agreement?
Does it discuss whether you must refund money, deposits, or retainers and, if so, how or when?
ARE YOU PROTECTED IF THERE ARE MULTIPLE AGREEMENTS IN PLAY?
Does the contract clearly state that all of the terms of the agreement are contained in the contract and that its terms supersede all other prior writings/oral representations?
To the extent your contract or statement of work incorporates terms and conditions, does it direct which agreement's terms will govern if those two agreement contradict?
DOES THE AGREEMENT CLEARLY DEFINE WHERE AND HOW DISPUTES ARE RESOLVED?
There are some very simple things you can add to your contract that will optimize your leverage should you become embroiled in a dispute:
Select a precise set of laws that will govern it (e.g., the laws of the State of New York or the Uniform Commercial Code)
Indicate whether the parties are required to settle disputes through structured negotiations and/or mediation before either party can go running into court.
Indicate whether disputes will be resolves through arbitration, if so clearly select the rules that will govern the arbitration (e.g., American Arbitration Association, JAMS) where the arbitration will take place, and whether 1 or 3 arbitrators will be appointed by the parties. While many courts shut down in response to the crisis, many arbitrations were able to proceed.
If you are not interested in arbitration, select a state in which lawsuits must be brought (i.e., forum selection clause) and include language which prevents the other party from complaining that such forum is convenient (forum non conveniens)
DOES THE AGREEMENT BUILD IN PROTECTIONS IF YOU NEED TO HIRE AN ATTORNEY?
Is your contractual counterparty required to pay your costs and fees (including attorneys’ fees) in defending claims brought by third parties because they failed to perform under the contract? If so, does the agreement give you the right to select your own attorney?
Does the agreement clearly state whether the parties will pay for their own fees or require the other party to pay the “prevailing” parties’ attorneys’ fees? For prevailing party provisions, be sure the contract clearly defines what it means to "prevail" (Does that mean being awarded any of the damages that were requested or some larger percentage?).
WHERE TO SEND NOTICES?
Does the agreement instruct how any required notices will be transmitted? For example, in the event of another lockdown, you must assume that either party will not be receiving physical mail in a timely manner. For that reason, consider adding in a secondary address or give some thought as to whether notice may be received by email. Whatever the form of notice, be sure to check the contact details still work on a regular basis.
ARE YOU BREACHING CONFIDENTIALITY BY SERVICING THE CONTRACT REMOTELY?
If your business relies on technology during a lockdown, does the agreement reflect as much? Does it indicate that you will be using VOIP, videoconferencing, or may be accessing your server remotely? Does it acknowledge that you will be working out of a home office? If not, it should and the other party should acknowledge that doing do is not a breach.
If reviewing your agreement becomes too onerous, don't fret. Russo Law LLC can analyze your agreements, identify any areas of concern that should be addressed, and even revise the agreement for you, all for reasonable flat fee pricing.
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Russo Law LLC deploys unparalleled training and modern technology to guide investors, businesses, owners, and executives efficiently through corporate, contractual, commercial real estate, and litigation issues. Call (+1-929-262-1101) or email today to learn more.
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