Resolving Business Disputes Resulting from COVID-19

COVID-19 has disrupted every facet of our everyday life, including how businesses large and small operate. The pandemic has caused disruptions in supply chains, missed deadlines, and broken contracts. When these situations occur, it makes sense that the wronged party wants compensation. However, a pandemic that dwarfs everything we’ve seen in the past 100 years is an unusual circumstance.

In many situations, failed deliveries and broken contracts are not the choice of the party bound by contract, but an inevitable consequence of a pandemic. In this strange new normal, how are business disputes resolved in a way that doesn’t destroy business relationships or cost tens of thousands of dollars in legal fees?

Legal Resolutions Could Be Put on Hold

First, recognize that legal remedies are unlikely to return to normal anytime soon. Many business disputes span multiple states, complicating court solutions when many states have not yet resumed all court activities. Even in areas where courts are operating as normal and processing cases, the backlog caused by such a long shutdown is substantial. Those just now filing cases can expect a longer-than-average wait.

Because of this, it makes sense to explore other dispute resolution methods that benefit both parties and do not rely on the current slow-moving legal system.

Force Majeure and “Acts of God”

Ideally, you should already have an Alabama business attorney who is familiar with your business contracts and how they may impact your resolution options. Many contracts have force majeure clauses, which prevent parties from demanding compensation when non-performance is caused by an event out of the other party’s control. It also covers non-performance caused by events that could not have been foreseeable when the contract was created.

“Acts of God” are events that cannot be foreseen, and they are another way to prevent parties seeking compensation or delivery of goods from getting damages from the other party.

In both cases, a pandemic is likely to clear the bar and trigger the force majeure/acts of God clause. The coronavirus outbreak is worse than any pandemic seen since the Spanish flu of 1918, and disruptions in businesses are inevitable. In these circumstances, the court is unlikely to force punitive restrictions and requirements on businesses that have no possible way of circumventing the difficulties caused by COVID-19.

The Importance of Preserving Evidence

If you are in a contract and the other party has failed to uphold their end, you still have options. Regardless of whether you choose to pursue other dispute resolution methods, or you plan on taking the matter to court, keep all relevant evidence and submit copies to your business attorney. Even if their failure to deliver is due to the pandemic, it is probable that they could have mitigated the damage and your losses in some way. During negotiations, you will want evidence of that.

Alternative Dispute Resolution and Protecting Business Relationships

Many businesses tied up in contracts that can no longer be executed are relying on alternative dispute resolution methods. These resolutions often bring issues to a close much quicker than court cases do, and beyond that, they allow both parties to minimize their losses and preserve the business relationship. At some point, the pandemic will end. When that occurs, you will be glad that you maintained business relationships and did not burn bridges.

Mediation programs are a popular choice for many businesses. Mediation allows both parties to air their grievances, state what they want, and negotiate from there. This option is less adversarial than a court case since both parties have to agree to a settlement or resolution before it becomes a court order. This strategy is particularly helpful for those who want to continue working with the other party but still want to mitigate their financial losses caused by the other party’s non-performance.

Arbitration is another option to consider. The decisions that arise out of arbitration are legally binding, so the stakes are higher than they are in mediation.

Beyond these options, business attorneys can often negotiate creative agreements that are beneficial to all involved parties. Your business attorney may suggest contract amendments, forbearance agreements, or settlements to drop the matter.

If your business is struggling due to COVID-19 and you are not sure how to get back on track with your legal issues, let us help. Fill out our contact form to have a Haygood, Cleveland, Pierce, Thompson & Short team member contact you or call us directly at 334-821-3892.