By now, the COVID-19 pandemic has disrupted nearly every aspect of our personal and business lives, including the world of contracts. Contractual obligations are not immune to influence during times of uncertainty. Below, I’ll explore a few industry patterns we’re seeing during this unprecedented business climate.

Force Majeure in the Spotlight   
According to global law firms, many international companies, including major logistics providers like DHL and Ceva Logistics, have decided to trigger a force majeure or “Act of God” shield against breach of contract terms. This is also happening in countries like China and large economic and manufacturing hubs like Hong Kong, where there has been a failure to meet trade agreement terms.

Shipbuilders, medical device manufacturers and international supply chains alike have been interrupted due to COVID-19. But these businesses can leverage force majeure to protect themselves from penalties for non-performance of their obligations under the contract. Additionally, buyers of these products may also benefit from force majeure clauses if there are downstream obstacles to getting goods to market.

Effects on the Travel Industry
The travel industry supports 15.8 million jobs in the U.S. – or one out of every 10 jobs in the country. As travel grinds to a near-halt worldwide to stop further spread of coronavirus, many travel companies will need to shield themselves with force majeure contract clauses. However, there are some travel-industry contracts in which force majeure clauses do not exist. In these cases, contracting parties must try to terminate the contract through the doctrine of frustration of contract. It is unlikely that anyone could have foreseen the timing, scope, and severity of the pandemic at the beginning of the performance of a contract. As such, courts may agree to terminate the contract and release both parties from their agreed terms. Aga, these are unprecedented events so it will be interesting to see how the courts deal with such scenarios.

The Search for Protective Clauses
Many of the scenarios described above relate to the supply-side contract party. But let’s consider the circumstances for businesses and organizations on the buy side – specifically those purchasing critical products or services. A director of procurement waiting for supplies to manufacture respirators or testing kits has to respond to a hospital or government employee waiting for late components to arrive. In this case, the director will need to be able to access the contract quickly and understand remedies, should the supplier fail to hold up their end of the contract.

Finding clauses like these in contracts can be extremely time-consuming and feel much like finding a needle in a haystack. Luckily, technology advances around artificial intelligence allows contract managers to easily search contract clauses and mitigate penalties and loss of reputation.

In-House Legal View of the Pandemic
Given that courts are closed during the pandemic, general counsels and attorneys may find themselves with more time on their hands. They can help out by providing teams with legal advice around some of the disruptive business activity, which is likely causing heartburn. Finalizing legal remedies may take a while, though. As such, it is best to be aware of your contract obligations – and those of the other party or parties to the agreement. For instance, if your business purchased products or services from suppliers that declare bankruptcy or cannot deliver due to staffing shortages, you would need to find an alternate supply source or understand your legal exposure for late delivery.

Provide Teams With Resources to React Quickly
A survey conducted by SHRM found that 49% of American workers had never worked from home before COVID-19. Yet, an unprecedented number of organizations have scrambled to support professionals who have no choice but to work remotely. As this newly distributed workforce tries to sustain a semblance of “business as usual” while facing continuity challenges, a central repository of documents and technology that allows users to efficiently access the information is essential to react quickly to any challenges businesses may face at this time.

Manpreet Dhillon, a commercial lawyer, is the Head of Legal Transformation at ContractPodAi. She has in depth knowledge of IT law with extensive experience in drafting and negotiating all types of agreements from IT to procurement and sales contracts. Read Manpreet’s full executive bio.