Did you know that the unemployment rate has hit 20% during the COVID-19 crisis? The effects of the coronavirus are very real, however, the economic effects of the virus are expected to impact world economies for years to come.
You may have agreed on a scope of works and signed a contract to complete that work by a certain date. However, now you may not be able to meet the terms of the contract. What do you do if you have a job but you can’t get back to work?
There is no easy fix to this problem, however, you will benefit from reading our in-depth article below.
Force Majeure Clause
It is often standard practice in contracts to include force majeure law wording. Force Majeure is also known as an Act of God Clause.
It excuses one or both parties from fulfilling their responsibilities to the contract on the basis of certain types of large events. Sometimes the contract will stipulate the events. These could include:
- Natural disasters such as earthquakes
- War and terrorist attacks
In other cases, it will employ general working to accomplish the same goal.
Of course, other factors can limit Force Majeure clauses. A government order could be the cause of the disruption. A world event that was foreseeable in advance could occur. It may not be possible to apply the full power of the Force Majeure in each of these cases. Different countries also interpret Force Majeure clauses in slightly differently.
However, in general, if you are not able to fulfill an agreed work contract, the Force Majeure clause may help you. It could provide you with reasonable grounds to exit the contract legally.
Contingency and Extension of Time Clauses
If you are not able to meet the timeline that all parties agreed upon in the original contract, it is likely you are not alone. Other parties or third-party suppliers will likely be impacted by the pandemic. Because of this, it may be possible to examine the limitations each have and to agree to allow extensions or other contingencies.
When representatives of each party talk together and examine the language that political leaders are currently using, they will likely agree that any delay would only be short term. It is possible that suppliers and workers will be working at capacity again within a few months.
Depending on the nature of the contract this could assure clients of your commitment to fulfilling your responsibilities. However, an adjusted timeline that shows reasonableness is necessary for this to be possible.
Indemnity Agreements and Limitation of Liability
If the contract does not have a Force Majeure clause and the project is particularly time-sensitive, you may not be able to push back delivery dates. Rather than delaying the completion of the project, your goal may be to limit your burden of liability.
Is there an indemnity agreement in the contract or any other wording that may allow you to limit the liability you bear? In some cases, there may be a maximum dollar amount or a calculation based on damages accrued as a result of non-completion. Aim for whichever is lower.
In some cases, it may not be possible to avoid indemnity on the basis of agreed contract conditions. However, if each party is reasonable it should be possible to minimize the damage.
The nature of the contract could require a company to carry insurance. This insurance would cover one or both parties in the event of non-completion of work. Read carefully the fine print in your policy.
In recent years insurance companies have taken steps to add wording that excludes pandemics from their responsibility. However, you should check the exact wording in your contract. If needed, you could hire legal assistance to test the strength of this wording. Even a partial payout by an insurance company can provide financial support in the current climate.
Even if you are not able to meet the conditions of the contract, it is important to remember that the opposing party is required to meet certain conditions when terminating the contract.
These conditions may include allowing a reasonable time for alternative solutions to be completed or for legal counsel to be sought. Or in other cases, clear communication and written acceptance of non-completion may be stipulated in the contract. Whilst this does not change the fact that the contract will be terminated, contract conditions may not allow other parties to rush towards termination.
When premature termination of the contract is a possibility, it is important to keep certain things in mind. Generally, companies should act in good faith and with a sense of sympathy toward other parties. While this may not always play out in practice, acting truthfully and honestly will encourage the other parties to do so.
When trying to resolve contractual issues, ensure that you have kept a good record of all communications. It can be important to recall when parties communicated first regarding potential delays. This can also cultivate good faith in other parties.
What to Do if you Can’t Get Back to Work … and Much More
The COVID-19 is causing fear and uncertainty amongst people across the globe. Knowing your rights as either an employee or an employer can help you to make good financial decisions in a time of crisis. You will be able to cope even if you can’t get back to work in the immediate future.
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