5 ways to Navigate COVID-19 and Your Business
COVID-19 is changing our life and business as we know it right now. We’ve pulled together a list of considerations to help our service-based businesses navigate these truly unprecedented times.
Review your Contracts. Now is the time to pull out your contracts and carefully review them. If it’s your own contract, you will be more familiar with what’s written in them, but we still encourage you to read them through the ‘pandemic lens’ and how certain clauses will play out. If you have signed contracts that are not your own form, it is especially important to review them carefully and also pay attention to any notice requirements and time periods.
Rescheduling and Cancellation Clauses. Most contracts have clauses that speak to what happens in the event that either party to a contract needs to cancel and/or reschedule and what happens to any deposit or other payment collected. Pay attention to timelines for any notice that may be required by the party cancelling. If the services being performed are to be rescheduled, ensure you get this in writing, as well as any other details that change as a result of the services being rescheduled, such as timelines for payment. Also confirm with each other that other than the specific term(s) being changed, all other terms and conditions of the original contract remain the same.
Review your Force Majeure Clause. First, you must have a force majeure clause in your contract if you want to rely on it. Force majeure literally means a ‘superior force’. These clauses typically either set out a long list of “acts of god” or simply state “acts of god”. It is relevant whether the list is exhaustive or open-ended when seeking to rely on the clause. A force majeure clause allows for non-performance of some or all obligations of the party looking to rely on it, without penalty. If either party wants to rely on this clause in the contract, they are the ones that must prove that:
The event (COVID-19) makes performance of the contract impossible (not just harder, time consuming or more annoying); and
That this event (global pandemic) was unforeseeable and a situation beyond either party’s control at the time they entered into the contract.
At this point, we actually aren’t 100% sure that COVID-19 will be considered a force majeure event by the courts. Even if they do, whether force majeure can be relied on is highly specific to each situation. The party wanting to rely on force majeure will have to show that they cannot perform their obligations under the contract, as well as the steps they took to prevent and mitigate (minimize) the losses and efforts to honour their obligations. All mitigation efforts and communications should be well documented. Relying on force majeure may also mean that your entire contract isn’t terminated, and instead that some of the obligations are suspended or cancelled. If you intend to rely on this clause, we highly recommend speaking to a lawyer first to see if it’s appropriate and applicable.
4. Check your Insurance
If you have insurance coverage, now is the time to review your policy. Review the coverage you have, what it covers, the specific events that trigger your ability to claim coverage under your policy and the circumstances and losses that it covers (physical damage, loss of profits, rent payments etc.). Keep in mind that everyone is being affected in some way by COVID-19, so prepare yourself for this being a slower claims process if you can in fact claim coverage.
5. Communicate, Document, Communicate!
Your clients have hired you for a reason, and hopefully when this DOES pass, you will have a strong relationship with your clients and they will still want you to provide your services. Now is the perfect time to be proactive, step up as a leader in your business (even if you are a one person show!), reach out and let your clients know what steps you are taking to work through this. This might mean adapting your offering, or by leaning on your cancellation clause, but by doing so in a professional way, it is more likely that your clients will want to hire you when they can. You can always go above and beyond what is written in your contract to provide exceptional service that your client will remember once life and business returns to normal. If you do make any changes or extensions, make sure to document it all in writing.
Now, b-r-e-a-t-h-e.
At AWE Legal, we’re here to help you during times of growth, and also during the tougher times, so that we can all come out on the other side of this stronger than before.
Please do not hesitate to reach out to AWE Legal if you have any business or contract law inquiries at: info@awelegal.com
By: Jaime Bell, AWE Legal: British Columbia