Coronavirus: WTF Happens to our Contracts now?

Even as an attorney I can admit that I never expected to use the term Force Majeure so damn much in my entire life.

Hi Friend! Welcome to my little legal corner of the webosphere. I’m an attorney based in New York who like you is living the nightmare of operating during a pandemic. There’s so much we can say about this devastating Coronavirus (covid19) and my heart goes out to every single person impacted by this virus.I hope everyone is safe and doing what they are required to do for the safety of their neighbors.

As much as I'm enjoying my bubble of adorable toddler moments and hilarious tiktok videos, the truth is, it has happened. The Coronavirus has hit our lives HARD. With every waking day comes a slew of postponements or cancellations of events and arrangements that many of us were looking forward to - were depending on. Even as an attorney I can admit that I never expected to use the term Force Majeure so damn much in my entire life. Whew! It's been a long week for me ( as I imagine it has been for you), so I thought it best to write this blog on WTF happens when your plans are no longer possible due to COVID19 and any related government order. Please note that this blogpost is NOT a substitute for legal advice. I am a lawyer but I aint your lawyer. Every situation is different and case-specific. So contact your attorney for more specific advice.Below are five points you should consider before you take any contract-related action:

1.     FOCUS ON POSTPONEMENT

We're all in the same boat of disappointment here (clients and vendors). Since everyone obviously wants to prioritize health and safety, clients will probably be willing to discuss postponement to a future date. This is helpful in not losing already-promised business and will maintain the relationship you have with the client. The vast majority of contracts easily accommodate an addendum focusing on date changes so this is by far the easiest route. We've seen the #postponedontcancel and #saveevents hashtags going around so I'm sure I'm preaching to the choir here.

You may also need to send out a new contract to reflect the rescheduled date and new terms / realities of the future services. Working with your client, you can craft a document that supersedes the original contract and ensures you retain all or a portion of your business going forward.

2.     CHECK FOR FORCE MAJEURE CLAUSES

A force majeure clause generally excuses all or some parties, depending on the wording of the contract, from performing due to events outside any parties’ control. I know you've seen a lot of arguments about what does and what doesn't constitute Force Majeure so I'll say this: In many cases, government orders prohibiting gatherings or other activities would qualify if that’s the nature of your business or contract. You should also check if it covers epidemics and pandemics or can be reasonably interpreted to cover those types of events. Before beginning any negotiation, check for these important clauses which could help you end the business relationship on a professional and courteous, not adversarial, note.

If you do not have a force majeure clause, some courts would typically weigh whether or not to excuse you from the contract as force majeure based on foreseeability of the event but that leaves a lot to interpretation. In practicality, you may have to cancel the contract and take any loss or other penalty which is included in the contract. However, working with your client, you may be able to negotiate down any penalty that you have to pay or be able to offer the value of the penalty as credit for future work so you don’t lose cash on hand.  

Here's a sample FM clause for your information only. Not only is this NOT legal advice and shouldn’t constitute as such, it’s also just the beginning when it comes to covering yourself. Contact an attorney in your jurisdiction:

No party shall be liable or responsible to the other party, nor be deemed to have defaulted under or breached this Agreement, for any failure or delay in fulfilling or performing any term of this Agreement [(except for any obligations to make payments to the other party hereunder)], when and to the extent such failure or delay is caused by or results from the following force majeure events ("Force Majeure Event(s)"): (a) acts of God; (b) flood, fire, earthquake, hurricanes, tornadoes, monsoons, tsunamis, storms or catastrophes such as epidemics, pandemics, infestations, or explosion; (c) war, invasion, hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest; (d) government order or law; (e) actions, embargoes or blockades in effect on or after the date of this Agreement; (f) action by any governmental authority; [and] (g) national or regional emergency; [and] [(h) strikes, labor stoppages or slowdowns or other industrial disturbances;] [and] [(i) shortage of adequate power or transportation facilities;] [and] [(j) other similar events beyond the [reasonable] control of the party impacted by the Force Majeure Event (the "Impacted Party")].

 2.The Impacted Party shall give notice within [NUMBER] days of the Force Majeure Event to the other party, stating the period of time the occurrence is expected to continue. The Impacted Party shall use diligent efforts to end the failure or delay and ensure the effects of such Force Majeure Event are minimized. The Impacted Party shall resume the performance of its obligations as soon as reasonably practicable after the removal of the cause. In the event that the Impacted Party's failure or delay remains uncured for a period of [NUMBER] [consecutive] days following written notice given by it under this Section [X], [either party/the other party] may thereafter terminate this Agreement upon [NUMBER] days' written notice.] 

3.     AMEND YOUR CONTRACT TO COVER SERVICES WHICH ARE DELIVERABLE

Some contracts are able to be split up and you can still salvage a business relationship and some income. For example, if your contract included a photo shoot, image consulting, and social media consulting, you may be able to convince your client to keep the image consulting through a Zoom or other type of call and continue with the social media consulting. While there is some loss of work, amending your contract through an addendum or a new contract which supersedes the old one can help you keep working.  

4.     IF YOU MUST END A CONTRACT, DOCUMENT EACH STEP

Sometimes, the only thing to do is end a contract due to not being able to perform. While unfortunate, the most important thing to ensure is that you document each step you take in ending this contract in a professional manner in order to ensure that you minimize any potential financial or reputational damage.

Some contracts contain a cancellation clause that speaks directly to what happens if either the client or the businessperson or company must cancel the contract. Some of these clauses contain penalties and forfeitures which require certain steps or payments by one party or another. If your contract includes that clause, you must abide by it. If your contract does not include that clause, you should work with your client to get to the most equitable solution possible for you both. 

 5.     WORK TOGETHER TO FIND A CREATIVE SOLUTION

Like I mentioned before, we’re all in the same boats of disappointment so everyone is more amenable to compromise. In times of uncertainty, many businesses and clients would be more flexible on the scope of services that were previously agreed to. Instead of hosting a networking lunch, maybe the contract can be modified to reflect a virtual networking brown-bag lunch hangout. Creativity is your friend when finding a solution in unique times and we’ve seen that with the epic insta-lives (I’m looking at you Dnice!), play date video chats and endless zoom meetings. Unusual times call for creative solutions.

I hope you find some use in this information as I know first hand how daunting this time is. We're living through an extraordinary economic time and contracts which may have been guaranteed a month ago are now in flux. Hang in there. With professionalism, patience, and these tips, you and your clients can weather this sh*t storm.  

XO KUNBI

As I mentioned earlier, Please note that this blog post is for informational purposes only and is NOT a substitute for legal advice. I am a lawyer but I aint your lawyer. Every situation is different and case and fact specific. So contact an attorney in your jurisdiction for more specific advice.