Working life has changed dramatically over the last year. More of us than ever are working from home and ‘zooming’ has become a verb that no longer exclusively applies to whizzing around at speed! But what about our commercial contracting relationships? How has Covid impacted them?
Here at Devant, one of the changes we’ve noticed are changes in the content and quantity of ‘force majeure’ clauses in the last year. Whereas previously these received little or no attention, they’ve suddenly become extremely important. Trying to decide if, for example, not being able to proceed with your conference due to Covid was ‘beyond your reasonable control’, or if you were obliged to continue using other measures (online conferences have become ‘a thing’!) could be the difference between sinking and swimming, financially speaking.
What have we learnt?
So what have we learned since March of 2020 that can be of use to us moving forward?
One thing we’ve learned is that the impossible can happen. None of us (perhaps apart from Bill Gates) predicted Covid and its effects on the world. But it’s important when we are drafting and negotiating contracts to realise that unthinkable things sometimes come to pass, and we should ensure that we pay attention to these possibilities. Normally, we’re not keen on padding out documentation with an endless list of ‘maybes’ and ‘what if’s. We like to keep the legal language to a minimum with the aim of keeping your business safe and profitable. But the last year has been a lesson in how business can change super-fast in extreme circumstances, and how priorities can shift.
Another thing that we’ve learned is just how resilient humans, and businesses, are. Resilience is one of those qualities that can viewed as an abstract concept. We’re rarely tested to the extent that most of us have experienced recently. It’s reassuring that the world generally carried on turning as a lot of us (including the Devant team) left the office for home, got in to the habit of daily Zoom coordination meetings and organised our hardware and software tools. The recent crisis period has acted as a catalyst for change, as technology has stepped up, and companies have realised that they CAN work remotely (even when they would have sworn it was impossible previously).
Probability and Impact
When assessing risk, we tend to consider things from two perspectives: probability and impact. A clause (like a wide-ranging indemnity) that might result in a major impact to you, might be acceptable if you deem the risk of it happening to be extremely unlikely. Alternatively, something that would cause you a modest amount of commercial pain, but that you anticipate happening multiple times, may be more undesirable. One interesting phenomenon at this stage in our recovery from the effects of Covid is that our assessment of the impact of other potential crises as perhaps not as terrifying as we may have thought previously (see previous point on resilience!).
Depending on your experience of the last 12 months, you may decide to change the way you view risk in your business relationships:
- You might consider refusing to accept any big risks in your contracts, however remote the probability of them arising
- You might become less averse to risk, on the basis that if you’ve survived Covid, you can survive anything!
- You could look at your insurance terms and work out if it’s possible to transfer some of the risk to your insurers. This will come at a cost, but if it helps your peace of mind it might be worth it.
- On a very practical level, you may want to devise escape routes from agreements, that you may have to use if something unexpected and traumatic happens.
However you decide to go forward, take this opportunity to review how your business ran over the last year. What worked well? How did your contracts impact the fortunes of your business? What do you wish you’d had in place before the first lockdown started? Would it still be valuable now?
You might remember the advice from the Government about holding off enforcing the terms of your contracts if they have a punitive effect on other businesses (the ‘we’re all in this together’ approach). Were you in this position? Do you now feel the relationships you’ve forged with your customers and suppliers might be more important that the contents of your contracts?
Maybe you’re more cynical about the whole thing, having had clients subject your contracts to a magnifying glass looking for vulnerable clauses to exploit.
Moving forward in 2021
Now that an easing of restrictions is beginning, how does the rest of the year look for you? Have your experiences during Covid affected how you will structure your commercial relationships from now on?
Whatever your experiences and your perspective, we at Devant will be here to support you. We’ll do our best to give you straightforward and practical answers to all of your contract and commercial relationship questions, and would be delighted to discuss any business strategies you might be considering, to help move your business forward in 2021. Great change is an opportunity, and we’re here to help you make the most of it!