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BENJAMIN WATSON — Thinking Ahead: Impact of Coronavirus on commercial transactions

BENJAMIN WATSON

As coronavirus concerns escalate, businesses should be alert to the emerging commercial challenges from potential disruptions related to its existence, spread and containment.  Suppliers may delay delivery of products, raw materials or other supplies, be unable to perform contractual obligations, or even try to charge higher prices. 

Businesses, in turn, may have difficulty or be unable to meet contractual requirements based on such issues.  Customers may become unreasonably demanding in the face of unexpected situations brought about by supply chain disruptions.

The guideline we suggest is simple: be fair, but insist those you deal with return the favor.

Many of these business strains and challenges will be solved over time. But, if you find your business faced with unreasonable situations you cannot tolerate, there are legal doctrines that can come into play in such situations, including contractual provisions (the oft-discussed force majeure clauses), and common law doctrines such as impossibility of performance or frustration of contract or other historic doctrines, as well as legal restrictions on price gouging. 

For example, if one of your suppliers claims that it cannot deliver products to you on a timely basis and is relieved from performance due to certain specific effects of the coronavirus, you must examine the precise language of your contract and determine whether the supplier has a contractual basis to do so, whether any such rights have been properly invoked and the remedies available to you.  On the other hand, if your business needs to suspend or delay shipments for similar reasons, you will want to be sure and comply with all of the terms of any force majeure clause in your relevant contract as to ensuring you have a qualifying event. Then, provide proper notice and be aware of all potential consequences of invoking such a provision. In either case, should you not have a contract with a force majeure clause, you should examine all of your rights or obligations under the law.

Should your business experience any disruptions due to this, it is critical to examine both your rights and your obligations under your existing contracts and under the law in general.

Butler Snow has the experience to assist your business in navigating the potential legal issues brought about by the spread of coronavirus and its impact on the global economy. 

» BENJAMIN M. WATSON is chair of Butler Snow’s e-Discovery Advisors team in the firm’s commercial litigation group. He focuses his practice on director and officer defense, contract litigation, administrative law and aviation law.

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