Resolving Business Disputes Resulting From COVID-19
The COVID-19 pandemic has led to insurance claims and coverage disputes, contract disputes, canceled projects, and supply chain disruptions, and these challenges continue to increase. Businesses that have suffered due to the coronavirus disruptions now have to navigate a new array of legal options, depending on their industry, financial state, and jurisdiction.
At present, we are in the reopening phase of what can be seen as the “new normal” as we strive to restore as much as we can of what we did prior to the pandemic in a post-Covid world.
Preserve the Proof
The courts in your jurisdiction might not be accepting petitions for new non-essential lawsuits at present, but they will likely be doing it soon. And contingent on the restoration of court access, there is plenty to do to assess and preserve claims and evidence. Further, alternatives to litigation in courts may now be available.
Most importantly, preserve any evidence regarding a matter. Filing deadlines and statutes of limitation might be extended, but this does not suspend the obligation of parties to a dispute to preserve evidence. Notably, the obligation to preserve evidence may come into play before any formal demand or claim is made.
Assess your Legal Stance
Understand your legal position if your counterpart is not performing on a contract or you are unable to perform. What are the provisions in the contract for default and non-performance? For instance, is it necessary to send a notice? What are the provisions of the applicable law? It is best to evaluate common law defenses such as force majeure (applicable if you have such a provision in the contract), impossibility, and frustration of purpose.
The Uniform Commercial Code (“UCC”) may govern a commercial contract. Different transactions are subject to their own termination protocol. For example, is there an issue with financing? Often, a condition of no material adverse change is associated with financing agreements.
In the case of such clauses, the interpretation of the governing jurisdiction will affect their utilities in certain industries, given the COVID-19 pandemic. There exist court decisions offering guidance in respective jurisdictions on this matter, and an increase is anticipated in such cases. The current environment may also cause other provisions to be interpreted in a different manner, such as time of the essence clauses.
Assess the Impact of COVID-19 related Regulations
It is a good idea to evaluate the impact of coronavirus-related rules and laws. Present governmental orders may affect your understanding of your rights. For instance, the suspensions of statutes of limitations and rules applicable to certain industries, such as the hospitality industry and construction site shutdowns.
In the event that you decide to act, what dispute resolution clause does your contract contain? If the contract provides for arbitration as an alternative to bringing a matter to court, what are the specific advantages and limitations of each? Are the interests of the parties such that both sides benefit from trying to resolve the conflict?
Determine Your Insurance Coverage
Checking your insurance coverage is a good idea before you take action. If your business has a claim for insurance coverage, such as for business interruption insurance, understand what steps you need to undertake before the insurer processes your claim. Understand whether you are free to retain counsel and begin proceedings? Business interruption claims, similar to most insurance claims, require copious amounts of paperwork. So, it is best to gather and organize the necessary information at the earliest.
Also, assess the coronavirus effect in the insurance connection as, in some cases, new laws may force insurance companies to retroactively provide coverage for pandemic-related business interruption claims. And insurance companies vow to sue to invalidate any such regulations. Remember to check other potentially applicable coverage. For instance, site disinfection might be covered by environmental policies.
Whether the applicable law extends or tolls the applicable statute of limitations, COVID-related claims arising now will take years to resolve, in most cases. After evaluation, if you choose not to take action now, ensure that you preserve the evidence. You may also have an obligation to minimize your losses.
Timing Decisions and Order Enforcement Issues
In timing decisions, there are other factors to consider besides the judicial system’s current capacity or available alternative methods of resolution and cost implications. It is also important to consider eventual enforcement. What is the viability of a prospective defendant in the long run? Are claims by others anticipated such that delay will prioritize you lower as a creditor after you have a judgment?
Remember that COVID has led to a significant rise in third-party litigation funding if you have a substantial claim, and cost is a concern. This is becoming a more common consideration in litigation planning, and funders have accommodated to the current environment.
These are general guidelines for the initial steps in addressing issues pertaining to a commercial contract dispute. Ensure that your evaluation and legal counsel consider all pertinent facts and legal issues. All forms of business dispute must be reassessed in the times of COVID.
Legal Counsel from Skilled Business Contract Attorneys
In these uncertain times, as businesses struggle to survive in the new “normal,” disputes are bound to occur. An experienced contract attorney at the law offices of John. H. Ruby & Associates can review your contracts and insurance policies to guide you on the best course of action. If you find yourself in a counterparty dispute, we can offer sound legal advice and various alternatives for resolving disputes. For an in-depth consultation, call today at (502) 895-2626.
