The Covid-19 situation is causing lots of problems involving contractual agreements. Here are the most common and how we can help you overcome them.
Covid-19’s impact on your contractual agreements
One impact of the corona crisis is that some companies will no longer be able to meet their delivery, purchase and other contractual obligations. We can therefore expect force majeure to be invoked much more often in the coming period – either by your own company or another party. It is vital you prepare for this by ensuring you have a clear summary of your contractual position. This requires insight and an overview of several contractual areas.
The table below contains a checklist of clauses you need to be aware of to properly assess and anticipate your legal position in relation to Covid-19.
|
Clause |
Explanation |
Is it easy to identify using AI? (NL, ENG) |
|
Force majeure |
Contracts often include the possibility to suspend obligations in case of force majeure. |
Yes |
|
Unforeseen circumstances |
Rarely included in contracts, but recognised in case law. Should there be a material change, the result can be that in some cases you are no longer bound by an obligation to comply. |
No |
|
Guarantees |
If you have issued guarantees, you must comply with them (even in the case of force majeure). This is because the guarantee obligation has already been entered into for a force majeure situation. |
Yes |
|
Indemnities |
An indemnity is a specific agreement between parties under which a specific risk is the responsibility of the contracting party. You could suffer serious financial damage if you have issued an indemnity. |
Yes |
|
Liability |
Most contracts place a limit on liability. |
Yes |
|
Penalty clause |
There is a chance that you will have to pay a fine for failing to comply with your contractual obligations. |
Yes |
|
Compensation |
Failure to comply with a contractual agreement can sometimes lead to a form of compensation that has already been determined in advance. |
Yes |
|
Insurance |
Your supplier may have had to take out liability insurance. If so, it may be useful to identify this and see if the contractual agreements offer options for you to check this. |
Yes |
|
Delivery obligations |
Have you or your customer specified delivery obligations? If you are not required to deliver to certain customers, you can choose to opt out of some deliveries so you can meet your obligations to others. |
No |
|
Suspension |
You may be able to suspend part or all of your obligations. For example, if your customer has not yet paid an overdue invoice. |
Yes |
|
Price adjustments |
Does the contract allow you to adjust your price? If so, can you only do this within a certain period or under certain circumstances, or can you do so at any time? |
No |
|
Change contract while in force |
Can you change the contract early, while it is in force, and if so, under what conditions? |
Yes |
|
Early termination |
Can you terminate a contract before the agreed end date? If so, this can give you some bargaining power and form a basis for renegotiating the contract. |
Yes |
|
Bankruptcy |
If a buyer or supplier suspends payments or declares bankruptcy, you need to know your rights and obligations in good time, so that you can respond immediately to the situation. |
Yes |
The Legadex team can help you to quickly identify relevant clauses and map out the legal position associated with them. Our team can perform this analysis manually at a rate of EUR 80 ex. VAT per hour, and/ or with support from AI technology for larger contract volumes. Based on a good insight into your position, you can then begin discussions with your contract partners and so hopefully quickly arrive at specific and acceptable solutions.
More information?
Our colleagues Peter Schepens and Morad Kada have a complete overview of the possibilities and would be happy to show you practical examples. You can reach them at pschepens@legadex.com and mkada@legadex.com