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Contracts & COVID-19

Mallory King - March 25, 2020 - Business Law, Coronavirus Legal Issues

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With an abundance of industries, companies, and individuals feeling the impact of the COVID-19 pandemic, law firms have been dolling out a plethora of (very long and sometimes complicated) articles containing advice across all legal practice areas. One area of law that is particularly implicated by the Coronavirus for virtually every entity is contracts – legal documents that are at the core of every relationship. These can be service provider agreements and MSAs, vendor agreements or other contracts related to your company and its business operations. For individuals, it could be lease agreements, loan agreements and really anything where you paid or were paid in return for something of value.

Below is a short & sweet list of five contract issues you should be thinking about as a result of COVID-19.

  1. Force Majeure Clauses. Does your contract contemplate a “force majeure” (aka: unforeseen circumstances; an “Act of God” such as floods, earthquakes, hurricanes, etc.) that could be interpreted to include a pandemic such as COVID-19?
  2. Impracticability. Are you excused from duty under the contract if that duty becomes “impracticable” (aka: unfeasibly difficult or expensive) to perform due to an occurrence such as Coronavirus?
  3. Frustration of Purpose. What is the main purpose of entering your contract? Has this purpose been frustrated (aka: eliminated) due to an unforeseen circumstance such as COVID-19? Does your contract provide relief from obligations due to frustration of purpose?
  4. Impossibility. Is your contract literally impossible to perform because of COVID-19? Is impossibility included as an excuse for nonperformance in your contract?
  5. Dispute Resolution. If you need to enforce a breach of contract as a result of COVID-19, are you familiar with what forum (aka: court, mediation, arbitration) and jurisdiction you are required to file a claim in?

These contractual issues can be analyzed before taking any action. On the other hand, we recognize and appreciate that businesses and individuals may not be in a position to try to proactively avoid breach of contract issues and instead must make hard decisions now that may result in legal ramifications to you or your company once back to business as normal. Regardless of which situation, knowing what your best and worst case scenario is can help guide your decision-making, now and later.

If you have a contract question, whether or not it is related to COVID-19, Traverse Legal is here to help you understand your contractual rights and obligations. Contact us and allow our attorneys to provide you with guidance and clarity amidst the present chaos or thereafter.

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