Client Alerts, News Articles & Blog Posts

Everything you need to know about BMD and the industry.

COVID-19 and Commercial Contracts: Is it Time to Modify?

The coronavirus (“COVID-19”) pandemic will likely create hardship for parties attempting to perform under many types of commercial contracts. Significantly, contracts requiring travel and/or involving the provision of goods and services are likely to be substantially impaired or impacted.

What to Do Now?

Inflexibility and hard line approaches may lead to disputes and expensive litigation. Global pandemic on the scale of COVID-19 has not occurred in over a century. For the modern business world and the United States legal system, this is truly a case of first impression. In order to avoid uncertainty, communication with counterparts regarding modification of existing obligations, may be prudent and lead to reasonable, mutually acceptable adjustments to the parties original deal. 

Nevertheless, you should carefully review the material terms and conditions of your existing agreements to ensure you are informed as to your rights, obligations and likelihood of breach or timely performance.

Communicate and Modify

Now may be the best time to modify existing agreements. Following an honest assessment of each unique situation, parties are encouraged to cooperatively determine a path forward. Communicate with your counterparts and willingly work towards a mutually beneficial arrangement. Reasonable business partners will understand that the current pandemic was likely not within the contemplation of the parties when they entered into their agreement. Any such modification must be reduced to writing, signed by both parties and incorporated into the original contract.  

Common terms to modify:

  • Contract duration
  • The goods/services involved in the contract
    • Adding or subtracting goods/services covered in the contract
  • The payment terms
  • The delivery terms

Before negotiating modification, consider the following:

  • Identify changes you feel are necessary and appropriate
  • Note any contract provisions that seem unfair or unnecessary
  • Note the date, time, and location when you chose to make modifications to the contract
  • Determine the justification for modification (i.e. workforce, government directives, supplies, shipping restraints, etc… simply citing COVID-19 likely not enough)
  • Try to predict how the changes might affect all parties' contract rights

In the event a party to a contract alleges it cannot perform as a result of COVID-19, the contract may provide guidance concerning legal rights and obligations. Most commercial contracts address the parties’ rights in the event of situations occurring outside of the control of either party. Most commonly, parties may be forced to interpret and/or rely on a ‘force majeure’ clause. Generally, a ‘force majeure’ clause relieves one party from performing a contractual obligation under certain circumstances that would make performance impractical, impossible, or even illegal. Pandemic may be a defined term, but more likely, the ‘force majeure’ language will not be so specific.  However, parties should be careful of claiming a force majeure event prior to experiencing an actual delay or other impact.

The Contract Matters

The extent to which COVID-19 excuses or extends contractual obligation(s) is a fact-specific determination that will depend on the nature of the obligations and the specific language of the contract. More specifically, in the context of COVID-19, parties will want to take the following steps:

  • Read the contract;
    • Determine the extent to which the contract provides for suspension or termination of performance;
    • Identify key provisions of contracts that may be affected by COVID-19 (e.g., representations/warranties, covenants, delay rights, termination rights, conditions, ‘force majeure’ clauses);
    • Identify notice requirements that have been or may be triggered;
  • Determine the extent to which COVID-19 prevented the party asserting an inability to perform;
    • Consider whether there are alternative means to perform contractual obligations or proactive steps that can be taken anticipating the potential future effects;
  • Determine whether the party asserting COVID-19 as a justification not to perform had the ability to mitigate its effect and the ability to perform.
  • Analyze the potential consequences of a material breach and/or default;
  • Manage communications with your counterparts, while coordinating internally to ensure a consistent approach; and
  • Regularly review and update relevant regulations (e.g., local, state, national directives on health and safety) in real time to determine whether they require steps or decisions that may affect contractual commitments.

In these uncertain times, Brennan Manna Diamond is here to provide clarity and comfort. Feel free to reach out to a BMD professional for guidance as you work through your analysis.

Ohio House Passes Bill 679 Establishing & Modifying Telehealth Service Requirements

In response to the COVID-19 public health emergency, the Ohio Department of Health, Department of Medicaid, and Department of Mental Health and Addiction Services issued emergency rules expanding telehealth services and increasing access to healthcare while the public was under a stay-at-home order. On June 10, 2020, the Ohio House of Representatives favorably (91 votes for and 3 votes against) passed House Bill 679 (“HB 679”), establishing new and modifying existing requirements regarding the provision of telehealth services in Ohio. This bill essentially turns the various administrative emergency rules into law and will fundamentally change the way healthcare is delivered in the state.

Ohio House Passes Bill 388 Including Out-of-Network Reimbursement Requirements

On May 20, 2020, the Ohio House of Representatives unanimously passed House Bill 388, which would enact five new Ohio Revised Code sections regarding out-of-network care and reimbursement.

Ohio Medicaid Starts Paying Pharmacists for COVID-19 Testing & Pilots Focus on Direct Care from Pharmacists

Two significant announcements were made by Ohio’s Department of Medicaid recently. Both announcements provide greater access to healthcare services for Medicaid beneficiaries in Ohio and by utilizing the expertise of pharmacists and providing reimbursement for their services related to COVID-19 testing.

Employer COVID Toolkit

As employees come back to work and employers operate “mid-COVID” in the “new normal,” employers must update their Employee Handbook and related employment policies. BMD has put together an Employer COVID Toolkit to supplement an employer’s existing Employee Handbook and policies to ensure compliance with the Department of Labor guidance, OSHA, FFCRA, the CARES Act and state law. Below is a description of policies and their purpose.

SBA Releases New Frequently Asked Question (No. 49) - Maturity Dates for PPP Loans

On June 25, 2020 the SBA released a new Frequently Asked Question (No. 49) concerning the maturity dates for PPP Loans as modified by the recently passed Paycheck Protection Program Flexibility Act. All PPP Loans received on or after June 5, 2020, will have a five-year maturity. Any PPP Loan received before June 5, 2020, has a two-year maturity, unless the borrower and lender mutually agree to extend the term of the loan to five years. Businesses should address the maturity issue with their SBA lender and discuss any available change to the loan maturity date.