Coronavirus (COVID-19) has made a quick and unprecedented impact on businesses throughout the United States. Businesses are scrambling to try to get their arms around their current and future operations and to identify risks as proactively as possible. A key component of this risk evaluation needs to be understanding contracts with key customers and suppliers.
The first step is to identify the relationships that need to be evaluated. Top of mind should be relationships with immediate COVID-19 related needs. That includes any customers or suppliers (i) who have provided a force majeure notice or other communication indicating that they may not be able to meet commitments to your company, or (ii) to whom your company may not be able to meet its obligations. Additionally, your company should be identifying key customer and supplier relationships that are not yet strained but have the ability to significantly impact your business if disrupted.
Once key relationships have been identified, contracts should be evaluated. This needs to be done on a case-by-case basis. An appropriate course of action will be determined by the specific facts of the situation and the precise language of the contract. While contracts need to be evaluated as a whole, the most important provisions will often be:
Keep in mind, this evaluation is even more important if your company has key relationships without written contracts or where the contract contains standard terms and conditions that were not previously negotiated. In relationships without a contract, the rights of the parties may be set by statute. With standard terms on something like a purchase order, the terms may be completely unfamiliar.
Understanding your company’s contracts is an essential part of business planning and identifying risks in this uncertain time. Once your company understands its contracts and risks, it needs to put a plan in place to proactively address them. Tucker Arensberg is here to provide guidance or take these tasks off your plate so that you can focus on other important business planning.
For additional information contact Rebecca Moran.
March 29, 2020
Enter your email address below and be notified when we post new information.