What to Do if the Coronavirus Pandemic Impacted Your Business? A Guide for Affected Companies
As the U.S. economy shuts down amid the spread of the coronavirus (COVID-19), many American businesses are on the verge of collapsing. Although the U.S. government is trying to curb the economic impact of the pandemic by releasing a massive economic stimulus bill and through other measures, many businesses may not survive the pandemic.
While companies are ordered to ditch face-to-face contact with customers and clients and must rely on digital platforms, the pandemic is causing unprecedented and large-scale disruptions to business operations.
We have prepared a guide for businesses that have been affected by the coronavirus (COVID-19) pandemic.
Can You Invoke a Force Majeure Clause Due to Coronavirus?
As the government-ordered quarantine continues, the adverse economic effects will mount, making it difficult or impossible for businesses to adhere to their contractual obligations. For this reason, our West Palm Beach business litigation attorneys strongly advise you to review contracts and assess contractual rights to determine whether you can invoke the “force majeure” clause or use other concepts to relieve the parties of some or all of the obligations.
Whether or not an unprecedented and unforeseen event such as the COVID-19 pandemic qualifies as a force majeure depends on the nature of the force majeure clause in your contract. Any unforeseeable and unanticipated circumstance or event such as a virus pandemic can relieve the parties of their contractual obligations.
Note: It is not enough to show that the coronavirus made the performance of contractual obligations “more difficult” or “more economically burdensome” to invoke the force majeure clause. Instead, a party invoking the clause must show that such performance has been prevented by the COVID-19 pandemic or was otherwise impossible.
A Guide for Businesses Affected by the Coronavirus Pandemic
If your business or ability to perform obligations under a contract have been affected by the coronavirus pandemic, do the following:
- Review your contract to identify the available legal options for discharging your contractual obligations during the pandemic.
- Learn about the notice requirements and deadlines under the contract. In many cases, contracts require the party invoking a force majeure clause to provide written notice to the counterparty within a specific time period. Failure to adhere to notice requirement could prohibit the invocation of the force majeure clause or could result in business litigation.
- Identify alternative options for the performance of your contractual obligations to reduce or avoid disruption to business operations prior to invoking the force majeure clause.
- Assess the potential consequences of a breach of contract or default, as well as the possible effects of invoking a force majeure clause.
- Negotiations between counterparties should begin immediately after the occurrence of the unforeseeable event (e.g., the coronavirus pandemic). The sooner parties become aware of their inability to perform their obligations, the higher the chance of settling their dispute out of court without commercial litigation.
- Gather and retain all supporting documents regarding the impact of the coronavirus pandemic on your business.
While the coronavirus pandemic does disrupt contractual relationships between counterparties, your business can take certain steps to avoid unnecessary disputes and mitigate the effects of the pandemic.
Speak with West Palm Beach commercial litigation lawyers at Pike & Lustig, LLP, to discuss the applicability of the force majeure clause and related doctrines in your particular situation. Call at 561-291-8298 to evaluate your case.