Back to Business: Optimizing Contracts for the Recovery
Updated: May 5
Whether you agree with it or not, many places are relaxing their stay-at-home orders in an effort to bring the economy back to life after the pandemic brought the world to a virtual standstill. There's a big push to get people back to work, and businesses are already re-opening or planning to reopen very soon.
This is a great time to review your standard contracts and update them. The current experience with the COVID-19 pandemic has led many business owners to rediscover the force majeure provision. Since the pandemic began, many companies have been focusing on this clause. Those companies that suddenly could not fulfill their contractual obligations wanted to know whether the provision offered relief or a way out of the contract, and those whose suppliers or customers were invoking the provision also wanted to know their options.
As the state of urgency begins to settle down, it's a good time to revisit the force majeure provision in your contracts and update it, if needed. But don't stop at the force majeure provision, because there are many other terms that might be improved.
No contract can ever be perfect, but a good contract will provide a framework for dealing with the unexpected. It's not just about having a better force majeure provision. The more alternatives and flexibility that you build into your contracts - whether it's the ability to suspend services, to terminate the contract early, to adjust the schedule or pricing - the more likely the contract will provide relief when needed.
If your relationship with the other party goes exactly as planned, you will never need to refer to the contract. If you never need to look at it again, that's great! Contracts exist for the bad times. They exist for when the memories of what was promised in the negotiations get fuzzy. They exist for when business pressures change and what one party was willing to do becomes too costly. And they exist for when one party gets bought by out by another company that must recoup its acquisition costs, so it starts to look for a way out. A good contract will provide the structure for resolving questions and conflicts.
Osensky Law is a trusted advisor who understands business and will work side-by-side with you to anticipate and address business and legal risks. Having effective contract forms and contracting processes creates efficiency and saves money. For analysis of your company's existing contracts and contract processes, please contact firstname.lastname@example.org