While it is likely that businesses will think to add force majeure clauses to future contracts, there is also reason to believe the specific language of these clauses could be modified. Likewise, there are other changes to be expected in post-pandemic contracts.

In the July 2, 2020 edition of The Legal Intelligencer Edward T. Kang, managing member of Kang Haggerty wrote “The Future of Business Contracts Post-COVID-19.”

Recently, I authored a column on force majeure clauses. In that space, I explained how many businesses have recently been turning to force majeure clauses in their contracts for protection in light of the COVID-19 pandemic. While it is likely that businesses will think to add force majeure clauses to future contracts, there is also reason to believe the specific language of these clauses could be modified. Likewise, there are other changes to be expected in post-pandemic contracts.

With Complaints Rapidly Increasing across the U.S., Now is the time to act

As of May 26, 2020, 2,278 complaints have been filed nationwide over the global pandemic COVID-19 according to the COVID-19 Complaint Tracker developed by lawyers at Hunton Andrews Kurth LLP. While the largest amount of these complaints deal with prison conditions and civil rights , the next highest areas of litigation involve insurance disputes, consumer disputes, labor and employment issues  and contract disputes. Claims regarding employment, contracts and force majeure provisions, or clauses contained in contracts which excuse performance due to natural destructive acts also known as “acts of God,” are on the rise. These complaints will continue to be filed as the effects of COVID-19 continue to be felt in ever-changing ways. Many of these complaints have been filed in jurisdictions where Kang Haggerty regularly practices—namely COVID-19 hot spots New York, Pennsylvania and New Jersey.

Although the COVID-19 Complaint tracker does not capture all of the COVID-19 related cases filed, it does provide insight into how this disruptive and deadly virus has negatively impacted business and individuals across the United States. Further, these metrics only represent disputes that have escalated to the point of initiating litigation, a costly and potentially prolonged endeavor. Many disputes are not captured in the above data either because a wronged party has not retained representation to advocate for their grievance, talks between opposing parties are ongoing, or settlements have been reached. Determining your best course of action can be critical.

Filing a complaint is one of the many tools skilled litigators have in their arsenal to obtain favorable outcomes for their clients. But before filing a complaint one needs to be clear on what terms govern your agreement, the responsibilities of all parties involved, how actions taken by either party may result in a breach to the agreement, and what protections from disruption are afforded to you under the terms of your agreement, your municipality, state or, or under federal statute. By consulting a lawyer to analyze your situation promptly, you may be able to avoid costly litigation related to any disruptions in service you experience or provide as a result of COVID-19. Kang Haggerty LLC has, for instance, successfully utilized force majeure clauses to excuse nonperformance under contracts, which enabled clients facing millions of dollars in liabilities to walk away from disrupted contracts with no penalty fees assessed or for significantly less than they were facing in settlements. As the metrics make clear, COVID-19 is fertile ground for disputes among individuals and businesses that continue to grow each day as our nation attempts to achieve a new normal.

Please consult our Kang Haggerty COVID-19 Resources: Preparing for Post COVID-19 Litigation page for additional information on specific practice areas and issues to consider, along with helpful tips and advice on preparing for reopening in a COVID-19 world, reducing liability and the likelihood of being sued successfully.

Tianna K. Kalogerakis is an associate at Kang Haggerty LLC, where she concentrates her practice on commercial litigation and business disputes. Tianna is the immediate past president of Barristers’ Association of Philadelphia.

In a changing COVID-19 world filled with new regulations, adjustments, and uncertainty, Kang Haggerty provides services to help our clients avoid litigation or to obtain favorable outcomes in litigation. Some COVID-19 services offered by Kang Haggerty that will help you address COVID-19-related issues include:

• Covid-19 Whistleblower, Qui Tam and False Claims Actions regarding recoupment of misappropriates government funds
• Contracting Disputes Resulting from Non-performance due to COVID-19 and the Invocation of Force Majeure
• Business Disruption or Business Loss Claims due to COVID-19
• Insurance Litigation and Recovery
• Insurance Bad Faith Claims for Refusal to Pay for COVID-19 Losses
• Legal Issues Involving Supply Chain & Distribution
• Compliance with Pennsylvania’s Guidance for Construction Industry Businesses Permitted to Operate During the COVID-19 Disaster Emergency
• Compliance with the City of Philadelphia’s Guidance for Construction Industry Businesses Permitted to Operate During the COVID-19 Disaster Emergency
• Employer liability for Employee Exposure to COVID-19
• Compliance with HIPAA regarding Privacy Standards and Security Measures for Protected Health Information and electronically stored Protected Health Information

Kang Haggerty can provide consultations and analyses on any of the above matters and more, specific to your needs and considerations. COVID-19 presents a series of unique and circumstances in a landscape that is ever-changing. Consult one of our attorneys today to learn the most up-to-date insight on COVID-19 issues impacting you.

Additionally, our business clients can take steps today to prepare for reopening in a COVID-19 world and reducing their liability and the likelihood of being sued successfully:

1. Have a justification for the actions you take
2. Thoroughly document your actions
3. Encourage remote work be confined to company-issued devices and programs
4. Assess your document retention policies
5. Evaluate your regulatory compliance and potential exposure
6. Search for small problems that may become big problems over time
7. Be wary of wrongful conduct and avoid engaging in questionable conduct
8. Touch base with your clients and vendors to keep your rapport strong
9. Determine whether changes or concessions are needed in your contract
10. Consider the future and how your business may grow to take advantage of opportunities presented

Now is the time to take steps to insulate you and your business from liability. Contact us today to determine what steps you should take to protect yourself and your business.

Many businesses have now turned to the force majeure clauses present in their contracts—invoking the idea that the COVID-19 pandemic is an unforeseeable “act of God” that has hindered the ability of parties to perform their duties as agreed.

In the May 14, 2020 edition of The Legal Intelligencer Edward T. Kang, managing member of Kang Haggerty wrote “Force Majeure During a Pandemic and Potential Contractual Disputes”

In light of the ongoing COVID-19 pandemic, businesses and individuals alike have struggled with following through on contracts that were agreed upon long before the novel coronavirus was even discovered, let alone foreseen as the cause of a worldwide health crisis. Many have now turned to the force majeure clauses present in their contracts—invoking the idea that the COVID-19 pandemic is an unforeseeable “act of God” that has hindered the ability of parties to perform their duties as agreed. For those who do not have such clauses present in their contracts, can the same concept be invoked in a court of law?

Now, in the wake of COVID-19 and its tremendous impact on businesses, it is important to pull out those databases, and update them with information particular to the current state of operations – yours and your contracting partners.

Notably, you should review your contracts for any force majeure clauses. Force majeure clauses provide that when extreme events beyond the control and fault of the obligor arise and prevent that party from performing under the contract, the impacted party is excused from (further) performance (payment for already performed services/delivered goods typically excepted, however).  Here, you will want to consider whether the COVID-19 outbreak constitutes a force majeure event under your contract and, if it does, whether it should be declared by you with notice to the other party or if you can expect to receive such notice from the (soon to be non-performing) other party.  Determine if an improper declaration has consequences under the contract or applicable law. For example, could the other party claim you repudiated your obligations or breached the contract if you improperly (or prematurely) declare a force majeure event and stop performance?

You will also need to establish if the declaration of a force majeure event triggers any other provision in the contract, such as early termination, liquidated damages, extension of time, or an obligation to mitigate damages.

Outside of the contractual force majeure clause, you should also consider whether the pandemic constitutes or caused a material adverse change that affects performance or, even if one party claims a breach of contract, if defenses such as impossibility of performance may apply.

Maybe most importantly, remember the Golden Rule.  If your company is facing exceptional challenges due to COVID-19 and its fallout and you seek to terminate or modify a contract, remember that other companies are experiencing similar issues.  Direct conversations about what companies are facing, what they are and are not able to perform, and when performance may be forthcoming – with the possibility of contract extensions and modifications – are likely to keep relationships civil and intact…and avoid the costs of litigation.

Jacklyn Fetbroyt is a founding member of Kang Haggerty LLC and is currently a committeeperson of the Voorhees Township Committee. Among other things, Jackie focuses on counseling companies and business owners through all stages of their ventures from conception to dissolution, assisting her business clients in all of their needs for maintenance and growth. On Township Commitee, Jackie strives to be a resource to and ears of the residents in her hometown.