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How to Handle Business Contracts in a COVID-19 World

Small business owners affected by COVID-19 know all too well the importance of written agreements in these uncertain times. What gets included, and what doesn’t, can make or break a small business when the unexpected happens. To answer your legal questions and help you mitigate business risks, we teamed up with Staples to co-host a free webinar featuring Rocket Lawyer Founder and CEO, Charley Moore, alongside On Call attorney, Michael Fucci.


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What should I include in my business contracts post-COVID-19?

There are several strategies you might consider to reduce uncertainty when drafting your own contracts post-pandemic. First, evaluate your past contracts. Are there clauses or provisions that didn’t work so well or left your business exposed to unnecessary losses or risks? 

Second, consider adding a “force majeure” clause to your contracts going forward. A force majeure clause is a provision in your contract that protects your business from unforeseen issues, like natural disasters, that can make it extremely difficult or even impossible to fulfill your contractual promises. The force majeure provision would allow you to back out of a contractual obligation should an extreme and unforeseeable event prevent you from fulfilling your end of the deal. In a post-COVID world, you may want to include a force majeure clause that specifically includes issues like pandemics or shutdowns related to the pandemic in your future contracts. 

Third, you might consider including an arbitration clause in your future agreements. If you had an issue with a contract and the courts were to shut down again, you could resolve that issue virtually with an arbitrator. Otherwise, you may be stuck waiting for the courts to open in order to resolve a dispute. 

Finally, it is really important to get all of your agreements in writing. Don’t rely on verbal agreements and a handshake to seal a deal. If it matters to you, then put it in writing and make sure that everyone signing the contract knows what’s in it. You can make many kinds of business contracts using Rocket Lawyer, including a contract for services, a purchase agreement, a sales agreement, and much more. 

What are some tips for successfully negotiating a business contract?

The first step is to read the contract in its entirety. Remember that the binding agreement is not whatever you verbally agreed to, but what you signed. Therefore, you need to know what specifically is in the written agreement. Secondly, you need to communicate with the other party to make sure that both of your needs are being met fairly. Outside discussions and negotiations may be incorporated into the agreement in writing by making an Amendment, if need be. 

Look to see if the contract contains any unfavorable or ambiguous terms. The best way to do this is to read through the contract as if you had no knowledge of the situation. That is how a court will read it if there are any disputes. It’s best if the contract is as clear and specific as possible, even if you know what is intended by unclear language. If you cannot reach terms that you feel are fair to you, then you may need to be prepared to walk away without a deal. Remember that no deal is better than being stuck with a bad deal. 

Contracts can be difficult to decipher. The language can be very technical and it can be hard to know which clauses must stay in and which ones are optional. Ask a lawyer if you have questions about a specific contract or general questions about how to limit your risk both during and after the pandemic. 

Is it legal to sign documents digitally?

Electronic signatures have been as legally binding as a physical, or “wet,” signature since the Electronic Signature Act was passed 20 years ago. Using RocketSign, you can either create or upload a document for digital signatures, and invite the other party to sign it virtually!

If your agreement needs to be notarized, you may want to check if your state recognizes e-notary services. About half of the states allow for this. If your state does not, you might consider using a mobile notary. A mobile notary will come to you and practice social distancing while the document is being notarized. The state of Montana recognizes out-of-state agreements that have been e-notarized. You can always ask a lawyer about your notarization options. 

Digitally signed documents may be stored safely online, including in your own Rocket Lawyer account. Physical documents with a “wet” or ink signature may be stored at your business location in a place that is safe and secure. 

What should I do if I think my contract will fall through?

Communicate early and often if you think you or the other party will not be able to fulfill your obligations under the contract. This gives both parties enough time and notice to figure out what their expectations should be, and if their expectations need to be modified. If the contract simply cannot go forward, then the parties can try to reach a compromise. Of course, it is never a bad idea to ask a lawyer, but communication and compromise may be good first steps. 

Going forward, you may want to consider an indemnification provision in your future agreements, or even a separate Indemnity Agreement. This may protect you from some liability if the contract becomes impossible to perform. 

If my business uses liability waivers, are they enforceable?

Some states have granted liability protection from COVID-19 lawsuits for businesses. If you are going to use a Liability Waiver for your business, you may want to check that the terms are clear, unambiguous, and fair. The other party needs to understand what they’re agreeing to when they sign it. A Liability Waiver will not necessarily protect your business from intentional, reckless, or grossly negligent conduct, so you may want to ensure that your business abides by local guidelines.  

You might also check that your business carries proper insurance. Do your current insurance policies have adequate coverage? You may also want to consider, depending on the nature of your business, rent guarantee, business interruption, or business renter policies. These are newer products that may be helpful in the event of something like COVID-19. If you’re interested in one of these newer policies, ask a lawyer if you have questions about whether or not the coverage will be adequate for your needs. 

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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