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The pandemic has thrust us into a new world. Review your business’ contracts in light of these changes.

 
July 13, 2020
Blog by Timothy Perry
 
 
The outbreak of COVID-19 has sent many businesses scrambling to figure out what to do and how to minimize the pandemic’s impact on their business. Businesses can start by taking a fresh look at their contracts and fortify them to ensure they protect the company against unforeseen situations like pandemics and social unrest.
 
Your business’ contracts should be revised or, at least, reviewed on a regular basis. A contract should be tailored to your business and protect you under both the current business environment and future environments. We do not enter a contract thinking that something is going to go wrong, but it all too often does. Do your best to anticipate changing conditions in order to futureproof them—it is imperative to include terms that will protect you in the event that things go sideways.
 
FORCE MAJEURE
 
Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract. When a party cannot perform for these reasons, this section of the contract excuses the parties from performing certain obligations. When revising your contracts, it is important to carefully delineate what constitutes force majeure. This will ensure that you have a process that defines exactly how the parties are expected to respond to the situation, such as weekly meetings or daily phone calls until resolved. Some contracts with essential services or critical venders are so important they warrant the inclusion of a “right to terminate” clause if the force majeure event continues beyond a certain timeframe.
 
DISPUTE RESOLUTION PROCESS
 
Consider a Mediation Clause
Many business owners choose to include a mediation clause in their contracts. This provision encourages the parties to enter into mediation in the event a dispute arises or unforeseen circumstances cause a significant change in how the parties will perform or dictates an early termination of the contract. Mediation is a voluntary process where both parties try to work out their issues directly, which often saves time and money for both parties.
 
TERMINATION
 
Contracts are rarely meant to last forever. Reviewing the terms that describe how the parties can terminate their contract and what notice periods are required is now more important than ever. Determining whether the notice must be in writing along with laying out a number of other requirements, including the manner in which it is delivered, is also important.
 
EFFECT OF TERMINATION
 
This section of the contract summarizes what happens in the event of a termination. All relevant subjects like the return of confidential information, delivery of products, implementing transition services, and current and future payment obligations should all be addressed.
 
REVIEW SECTIONS UNIQUE TO YOUR CONTRACT
 
Every well written contract is unique and meets the specific needs of the business it was drafted for. The sections mentioned above are a starting point, but are by no means the only sections of your contract that should be reviewed—and potentially bolstered— to provide the fullest protections possible in this brave new world. Before you ever sign on the dotted line, it is always a good idea to have an experienced attorney thoroughly review your contract. Business contract attorneys can review, negotiate, and draft legal agreements according to state laws and their clients’ needs. The attorneys at Taibi Law Group have helped countless business owners review and strengthen their contracts to protect them from unforeseen circumstances and events.