COVID-19 closures, stay-at-home orders, and governmental restrictions are wreaking havoc on otherwise happy business relationships. Meeting monthly payment obligations is one major concern facing all parties as the calendar turns to April without an end to the pandemic crisis.
Businesses might also encounter difficulties reaching other deadlines or touchstones in a timely and complete manner.
Whether you are a contract party at risk of defaulting for non-payment or performance, or a party at risk of not being fully paid or of being deprived of an expected benefit of the other party’s performance, one important consideration is how to give proper notice of your hardship or demands. Failing to give proper notice means failing to preserve your position, and parties who fail to preserve a material position will often find themselves giving the other side better arguments for waiver and release, among other things.
For example, if you cannot make a payment or tender a required non-monetary performance, there may be a contract requirement for you to advise a particular person representing the other party of that fact within a particular number of days, and even by a specific type of mailing. The failure to do so could prejudice your entitlement to a “cure period” or absolve the other side from an obligation to negotiate with you. You may also lose your right to a “grace period” by waiting too long to give notice. In these circumstances, the other side could easily claim that it did not know the existence or scope of your concerns and gain the upper hand.
Claiming delay due to force majeure is often required to be specifically asserted by written notice to the correct people within a certain timeframe describing the specifics of the force majeure event. A contract party should never assume that the existence of a force majeure event is also assumed by the other party.
Notice obligations and cure provisions can vary widely in different contracts. Sometimes terms are explicit and detailed. This is likely true in more complicated or longer-ranging deals. At other times they are simple or implicit. This is likely true in straightforward deals or contracts where the parties are very familiar with each other.
Coronavirus and quarantines are creating a host of issues for large and small businesses.
Whether you are concerned that you are facing a breach of your obligations, are anticipating that the other side will soon breach its obligations, or are negotiating a new contract and need better protection, McMillan Metro Faerber’s attorneys can help. Please call Peter E. Ciferri, Esq. at (240) 778-2307 or e-mail pciferri@mcmillanmetro.com for a consultation.
