Be Proactive to Protect Your Contract Rights
Updated: Mar 27, 2020
In response to the COVID-19 virus, New York State has, as of March 22, 2020, stayed almost all pending NYS civil court proceedings and barred the filing of new civil cases (except for those matters designated by NYS as essential). The Federal courts are currently working under fewer formal restrictions, but as courts with more limited jurisdiction, they are not an available forum for the resolution of many business disputes. At the same time, NYS has required nearly every non-essential business “to reduce the in-person workforce at any work locations by 100%.”
Although business activity will slow during this public health crisis, businesses will still have legal disputes that arise as a result of this crisis, as well as those that arise in the normal course (if that term even applies these days). Obviously, there will be a deluge of litigation over liability for the economic losses caused by this crisis once it subsides and the NYS courts resume operations. But for today and the near future, the question for many businesses is:
How can we protect and enforce our contract rights when we can’t go to a court for relief?
Let’s look at that question in the context of a business that buys and sells industrial supplies, depending on an uninterrupted supply chain to meet its customers’ orders. The business’s suppliers may claim that they are unable to deliver ordered materials because they can’t get them, thereby preventing the business from delivering to its customers. In this scenario, all parties are hurt financially, and all parties under an obligation to perform will invoke COVID-19 as an excuse for their failure to perform, raising defenses such as force majeure, frustration and impossibility.
Without the available leverage of a potential lawsuit, the business’s best chance for short-term financial relief may be to contact the affected suppliers and customers and try to resolve the competing commercial claims in a cooperative and reasonable way.
However, keep in mind that the suspension of some NYS civil litigation laws does not excuse businesses from their contractual obligations under the relevant agreements or NYS law to, for example, give written notice of breach, or to formally declare force majeure or other contractual defenses, or to give assurances of performance when requested. And all relevant documentary and witness evidence should be gathered for use if a dispute escalates.
As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.
You can view more COVID-19-related posts in our COVID-19 Resource Area here.