How to Handle Interrupted Contract Obligations and Negotiations Due to COVID-19

How to Handle Interrupted Contract Obligations and Negotiations Due to COVID-19

by admin
April 24, 2020

COVID-19 has caused incredible disruption and interrupted contract obligations across multiple industries. Businesses have been forced to close their doors. Many cannot operate using their usual processes. Others may struggle to keep up with their obligations to clients and vendors alike. While shifting to a paperless contract approval system will help, you may find yourself without access to subcontractors that you usually deal with or struggling to keep up with your contractual obligations. How can you handle those processes due to COVID-19?


Step One: Check the Terms on All Your Contracts

Many of your contracts may also have terms in place that govern operations in the event of a crisis beyond your control. This includes an “act of God” clause that will provide you with a blueprint, however vague, for how to handle many of the situations that may arise during this crisis. Some of your contracts, for example, may have terms that will allow you to change service delivery dates or what you’re offering to your customers. Others may have specific terms that state how and when you must repay clients whose jobs you cannot complete in the midst of a crisis. Familiarize yourself with those terms so that you can deliver on customers’ expectations. 

Step Two: Contact Representatives as Soon as Possible

If you have contracts or contract negotiations that are or will be disrupted by COVID-19, get in touch with those representatives as soon as possible. Most companies are experiencing some type of impact from COVID-19 at this time. They may be willing to renegotiate contractual terms or deadlines based on those changes. Discuss:

Contractual Deadlines

Are you going to have trouble meeting deadlines described in the contract due to decreased workers or changed policies in your warehouse or others? The sooner you get in touch with a representative from your contractual partner, the sooner you can make necessary changes to your contracts — and the better both of you can prepare.

Inability to Deliver

In some cases, you may not be able to deliver on your original contractual obligations. Venues, for example, might not be able to reopen due to COVID-19 social distancing guidelines. Other companies might have a limited capacity to deliver specific services due to fewer available employees. If you know you will not be able to deliver on your interrupted contract obligations, contact the relevant parties as soon as possible.

Changed Needs

You need to contact your clients as you manage potential changes to your contracts. At the same time, you need to connect with your vendors and subcontractors to reflect your changing needs. Your company may, for example, need a lower volume of production from some of your vendors. Alternatively, you may need to cancel specific orders as you see what managing COVID-19 will look like for your business. Contact your vendors as soon as possible to revisit those terms so that you can decrease any penalties associated with those needs. 

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Changed Processes 

Your business may have made many changes to help protect your employees and your customers alike. Your contractual partners need to know about those changed processes and guidelines. You need to accomplish a couple of different things in this conversation with the representative. First, you need to describe the steps your company is taking. Your clients, for example, may need to know that your employees are working remotely, or what steps you’re taking to keep your facilities as clean as possible. They may also need to know how any terms will differ from what’s described on your contract, especially with regard to personal contact between you and your clients. 

Once you discuss terms with those representatives, make necessary changes to those contracts. Then sign them electronically to indicate that they have been approved by both parties. Whether you need to interrupt services temporarily or make plans for after the crisis is over, you want a blueprint in place. This will allow your business to keep operating effectively.

Step Three: Make Negotiations Virtual for Interrupted Contract Obligations

Your business may have had many of your contract negotiations interrupted as you made the shift to remote work. Both you and your clients — and your vendors and subcontractors — may have been forced to stop work abruptly. Alternatively, you may have to transition to a remote environment. You also may have canceled meetings without rescheduling them, especially in the immediate aftermath of social distancing requirements in your state. 

As things start to settle back to normal, however, you should continue with interrupted contract negotiations as soon as possible. Reschedule meetings, moving them to a virtual environment instead of meeting in person. You should:

  • Set up your contract management software. You can ensure that your contracts can move through the approval process virtually, rather than needing any steps completed in person.
  • Ensure that you have an electronic signature option available. Electronic signatures are just as valid as physical signatures. So you can go ahead and get those contracts signed and keep moving forward with your business.
  • Revisit contract templates and compliance needs to ensure that you are both meeting the latest recommendations. Also, be prepared for future repercussions of the pandemic and how they could impact your business. 
  • Issue reminders about any contract negotiations or interrupted contract obligations that you need to revisit. 

The COVID-19 crisis may have temporarily interrupted contract obligations and negotiations. But it won’t bring business crawling to a halt for many industries. By following these steps, you can effectively handle those interruptions and prepare your business for success. See how our software can help by scheduling a 1:1 demo.

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