The pandemic forced many businesses to make the difficult decision to suspend or shut down operations. Workers were furloughed or laid off, supply chains were disrupted, and projects were put on hold. During this period of economic fragility, businesses curtailed spending and conserved resources, which meant many contracts were terminated prematurely, ignored, or even breached. As businesses begin the process of rebooting, executives are left wondering what their legal rights are for reestablishing these tabled business relationships. Here’s what to do if you think you “paused” a contract:
1. Review Your “Old” Contract: The first step is to determine whether a valid contract exists. Ask your attorney to review clauses in your agreement discussing the term (duration of time the contract is valid), termination procedures (how the contract is ended), and actions that constitute breach (invalidating the contract). A seasoned business attorney can determine whether a valid contract exists, or if your relationship has been dissolved.
2. If You Sent a Notice of Termination: A valid termination of contract means that the contract has been ended and is no longer in force. If you wish to reengage, you will need to agree to a new contract. You can keep the same terms and conditions, but you will need new signatures and dates. Before you undertake this process, verify that your termination was done properly. If your contract contained a termination clause allowing you to exit the deal, make sure you followed the proper termination procedures as stated in the agreement. Did you send notice using the correct methods, to the correct address, giving the required amount of notice? If not, you may still be under contract without realizing it. A seasoned business attorney can review your situation and advise.
3. If You Do Have a Valid Contract but Want Different Terms: Approach your contact and ask for the terms you will require to continue the relationship. Pay special attention to terms surrounding term/duration, payment, exclusivity, and non-compete. With the market under stress, it is prudent to stay as nimble as possible. If they agree, execute the new agreement, specifying that it supersedes and replaces the previous contract. If your contact refuses, you may wish to give notice of non-renewal, or let the contract lapse at the end of the term to move on to greener pastures.
4. If You No Longer Have a Contract and Want One: Similarly to the last section, be prudent in your business discussions and advocate for flexibility. Do not lock yourself into a long-term deal, hefty payments, or overly restrictive terms. Due to the evolving market, you may find that in six months, your business has transformed dramatically, and the relationship is no longer a good fit, or needs to be modified for to maximize success.
Consider engaging with a seasoned business attorney to perform a quick review of your situation and advise you on the written terms of your business relationships before you sign. This will provide you with excellent insurance against wasted time, expense, and hardship.
Andrea A. Tarshus, Esq. began Tarshus Law Firm in 2015 to provide efficient, accessible, and fair General Counsel legal services to businesses and business owners. Tarshus Law Firm represents Western New York and Buffalo based businesses as well as large international and publicly traded corporations in industries such as: audio video ("AV"), products distribution, transportation and logistics, medical marijuana, marketing, social media, healthcare, and other sectors.
Andrea’s engagement with businesses regularly includes negotiating and executing favorable contracts, legal research and writing, project management, administering internal legal and operational controls, problem-solving, and strategizing. She enjoys working with business owners, C-suite executives, and company managers to create a comprehensive legal and business framework that supports operational efficiencies and strategies for growth.
This article is intended to be informational in nature, should not be relied upon by the reader without consultation with an attorney, and does not create an attorney-client relationship between the author and reader.