Business Contracts in COVID-19 Era: A Model Contract to Maintain Status Quo

Business Contracts in COVID-19 Era: A Model Contract to Maintain Status Quo

By Bill Haut, Densborn Blachly LLP

Now that we’ve closed our business or substantially reduced our operations, and customers have done the same, substantially reducing sales and revenue, what do we do about all the contractual commitments we’ve made? Do have we still have to pay X? And deliver Y?

These are just a couple of the questions businesses are confronting among the many other realities resulting from the coronavirus pandemic. Rather than trying to decide what an appropriate unilateral course of action would be in the context of your contractual obligations, the best first step is almost always to communicate directly with the other party in an effort to reach a mutually acceptable resolution. Even if the ideal win-win situation is not possible, a genuine effort by the parties to actively address and resolve an issue at an early stage generally results in an effective solution much sooner at significantly less cost than a protracted dispute.

“Standstill” agreements have been used for years in an effort to preserve the status quo among contracting parties, and they may prove to be very help in the wake of the coronavirus pandemic. As business owners work through the many operational and financial issues created by statewide stay-at-home directives and related business closures, there is a model form of contract they can employ to maintain the status quo of their contractual relationships for a limited period of time.

Created by lawyers Jonathan Lipson and Norman Powell, the model agreement was recently published by the Business Law Section of the American Bar Association and can be found here. As counseled by the drafters, it is recommended that you use the agreement with the assistance of your legal counsel, but the model agreement should be helpful in saving time and money.

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