Managing contractual obligations and negotiations during the COVID-19 pandemic

  • Carefully consider all your contracts to ascertain your right to suspend performance of affected obligations or otherwise exit contracts that are impossible to perform.
  • Appropriate governance and a business-wide focus will assist in developing a consistent strategy — risk management should be a key pillar in this strategy.
  • Take care before invoking a force majeure clause or claiming that a contract is frustrated, as these steps may lead your counterparty to claim you have repudiated the contract.
  • Consider how and when any unusually flexible or restrictive provisions can be ‘switched off’ when the pandemic abates or can be switched back on if there is a further outbreak.

With the Prime Minister announcing on 18 March 2020 that Australian measures to combat the spread of COVID-19 (novel coronavirus) may be in place for at least six months, the need for Australian businesses to stabilise their supply chains and contractual relationships in order to see out the crisis is abundantly clear.

This article explores how businesses might navigate contractual obligations that are affected by COVID-19 and provides tips for negotiating contracts during these unprecedented times.

What if your existing contract is affected?

Protect your rights when negotiating an interim solution

COVID-19 is likely to affect all businesses across all industry sectors. In some cases, both parties to a contract may be in breach of its terms due to COVID-19, and each will certainly have its own concerns regarding business continuity.

This article is exclusive to Governance Institute members and subscribers.

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