It’s fair to say that COVID-19 has disrupted every aspect of our lives and that businesses have faced unforeseen challenges in trying to muddle through a difficult, disruptive, and painful period in our history. But both life and business continue on, and as we head into a new year, it’s important that we review our existing contracts to see what works for us and what needs to change.
With that in mind, when doing your annual review of existing contracts, it’s crucial that for 2021 you take a particularly hard look at your agreements to see which ones might need an update or adjustment for 2021, still likely to be different from the year we entered almost 12 months ago.
Commercial leases
While some businesses have managed to keep their literal doors open, perhaps out of necessity given the nature of the company and the work, others have abandoned their offices entirely for the safety of remote work and virtual meetings. These companies are spending thousands of dollars on commercial leases for space that has gone unused and may continue to stay empty for months.
If you’re seeking an out from your current lease, look at the contract’s force majeure clause to see if the conditions brought on by COVID-19 meet the standard that would allow for the termination of the contract. The contract may also provide for early termination on other grounds or abatement of rent in the event that your ability to use the premises is adversely affected. This is an area where a business lawyer can help you navigate the agreement’s terms.
Sales contracts
Businesses everywhere are up against a struggling economy, and even those that have remained relatively unaffected are still linked with many companies feeling that struggle. When reviewing existing sales contracts, it’s worth considering the value of those customer relationships; short-term sacrifices may be worth long-term partnerships.
Your sales contracts may provide termination clauses that allow one or both sides to end the deal, including force majeure provisions. And while it may be expedient for one or both parties to try and escape the agreement entirely, it may be productive to renegotiate terms to match the current circumstances and financial strain.
Vendor contracts
It may be the case that your vendor contracts for goods and supplies is proving to be a millstone around your neck, given reduced output and supply chain shortages. The first step to avoiding disaster is taking action before any breach of contract; hopefully, vendors and customers alike will prove flexible in renegotiating contracts with an eye towards new realities.
Early termination clauses may prove useful, provided you’re able to meet the conditions required. You should also be aware of severability clauses; just because a vendor offers a break on one part of the deal doesn’t mean the other parts of the contract aren’t still in effect. In short, do everything you can to adhere to the letter of the contract until such time as it is ended or renegotiated, and always seek professional help.
Employment agreements
Your guidelines and contracts for employees may have to change with the shifting circumstances brought on by COVID-19. Remember that employment law varies state by state.
Your employment agreements should stipulate both the work required, locations, and the salary promised to employees, so if you’re making significant alterations, you’ll have to first have employees agree and sign a new agreement. These agreements also detail the conditions under which an employee can be terminated, so if you’re forced to lay off or furlough employees, make sure you’re in compliance with contract terms for employees and also consultants.
Given the changes required in workplace safety or the implementation of remote work, consider updating your employee handbook to cover all of the new policies you’re putting in place to keep employees safe and productive.
Equipment leases
Like your office space, your leased equipment may be sitting idle (or near to it) due to remote work or a dearth of business, and you may be looking to scale back to deal with lessened revenue. Like other contracts, equipment leases may include provisions that either allow for the assignment of the lease to another party should you be able to find an interested buyer in your industry or for termination because of an inability to perform or deliver.
Therefore, you should be aware, both upon review and during signing, of “hell or high water” clauses in equipment lease contracts that require you to meet all of the obligations of the contract, irrespective of circumstances. Leases may also include termination values, which sets a scheduled amount due for the equipment in the event of default. With any luck, you’ve prepared for any eventuality in negotiating a lease, but if not, be sure to review your options and see if there is any flexibility to renegotiate.
Parsing contracts can be difficult without a legal background, which is why it’s crucial that you get the help you need for a regular annual review of agreements. As a LegalShield Small Business Legal member, you can work with a provider law firm for legal review for a monthly quota of documents. Learn more about LegalShield’s membership plans and how you can get the legal help you need.
