Most business owners don’t enter into contracts with a view of dishonoring them. Sometimes, unforeseen pandemics do happen. Like right now, with the global covid- 19 situation.
While most governments have taken measures to temporarily cushion small businesses from crashing, most businesses are still struggling to meet their usual obligations. Risk management is important, now more than ever before.
As a small business owner, what can you do to mitigate the exposure occasioned by this pandemic ?
Here are some ideas on what you can quickly do to manage whatever uncertainty you’re currently going through with your contractual obligations.
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Exhaustive risk assessment
You can consider having a systematic review of all your current contracts to assess your risk exposure and actual exposure. You can outsource this service to your trusted legal services provider, or you can consider doing it yourself. In case you consider the DIY option, you may need to look out for various clauses and what these mean for your business. Some of these clauses include provisions on material adverse change, frustration, dispute resolution, force majeure among others. Please click here to access a brief guide to help you with that.
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Reach out
Reach out to your partners in the contract. Explain your situation to them. Reiterate that you understand your legal duties and obligation under the contract in question. Keeping the communication lines open could actually help you maintain your credit scores or a good reputation in the long run. That, and the fact that advance but short notice is always better than none. Always.
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Re-negotiation
Remember that your partners to that contract are equally keen on risk management. It’s a business after all. You can consider exploring different economic outcomes (like insurance for example) that still provide value to the other parties to the contract. Consider re-negotiating extensions on certain key performance markers and deliverables. Winning proposals are the way to go.
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Explore Termination
Finding ways to legally exit the contract in question should come as a last resort. Assuming that by the time you’re exploring this option you have had an exhaustive review of your legal obligations under the contract in question, termination should be a fairly straightforward step. Should you be in doubt, seek legal advice first from your trusted legal services provider.
In summary, these are unchartered territories for businesses all over the world. This type of extensive guide can help those going through the process of reviewing their contracts with a view to identifying their contractual obligations.