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Potential Coronavirus Impact on Commercial Transactions & Real Estate: Thinking Ahead

As concerns continue to be raised and addressed with respect to the Coronavirus, businesses should be alert to the real potential that they may face commercial challenges from potential disruptions related to its existence, spread and containment.  Suppliers may delay delivery of products or raw materials or otherwise fail or be unable to perform contractual obligations or even try to charge higher prices.  Your business, in turn, may have difficulty or be unable to meet contractual requirements based on such issues. Your landlord or tenant may have concerns about payment of rent, operating hour requirements, continuous operating covenants or even the ability to hold meetings or operate in the current environment. Customers may be unreasonably demanding in the face of unexpected situations your business faces.

The guideline we suggest is simple: Be fair, but insist that the ones you deal with be fair with you.

Many of these business strains will be ironed out in the regular course of business.  But, if you find your business faced with unreasonable situations you cannot tolerate, there are legal doctrines that can come into play in such situations, including contractual provisions (the oft-discussed force majeure clauses), and common law doctrines such as impossibility of performance or frustration of contract or other historic doctrines, as well as legal restrictions on price gouging.  For example, if one of your suppliers claims that it cannot deliver necessary product to you on a timely basis and is relieved from performance due to certain specific effects of the coronavirus, you will want to examine the precise language of your contract and determine whether the supplier has a contractual basis to do so, whether any such rights have been properly invoked and the remedies available to you.  On the other hand, if your business needs to suspend or delay shipments, or in connection with leasing matters, if you need to suspend operations or occupancy, for similar reasons, you will want to be sure and comply with all of the terms of any force majeure clause in your relevant contract as to ensuring you have a qualifying event, provide proper notice and are aware of all potential consequences of invoking such a provision.  In either case, should you not have a contract with a force majeure clause, you should examine all of your rights or obligations otherwise under the law.

Should your business experience any disruptions of such nature, it is critical to examine both your rights and your obligations under your existing contracts and under the law in general.

Butler Snow has experience in these areas and is ready to strengthen your response to any problem. Contact your Butler Snow attorney or respond to this email should you have questions or need assistance in preparing for a disruption to your business.

For information on how you should prepare your employees and workplace for Coronavirus, click here.