While this post may not fit under the header of the “Privacy Hacker”, I wanted to step aside from privacy and security and share some insight on common issues and topics with which we are assisting clients during this unprecedented time.

Contract Interpretation and Updates

Clients are seeking our guidance on contract interpretation, including the ability to terminate contracts. With the supply chain disruptions that flow through the entire chain, force majeure clauses are now being closely scrutinized.  Depending on the law that governs the contract, force majeure events may or may not excuse performance: factors hinge on whether the event causing the failure to perform was foreseeable and if performance is truly impossible (as opposed to much more difficult or expensive to perform). Notably, not being able to pay generally is not considered a breach that can be excused due to a force majeure event.

While some force majeure clauses are written broadly and refer to “events beyond the reasonable control” of a party to the contract, other clauses refer to an enumerated list of events. It is questionable how courts will interpret the broad clauses and whether or not a pandemic or quarantine will be read into the clause if there is only a broad catch-all statement. Again, this will depend on the law that governs the contract, a fact-specific analysis and of course how the language actually reads. Even when a contract lacks a force majeure clause, common law defenses to performance, such as impossibility, impracticability and frustration of purpose, should be considered. Without question, this is an intertwined, case-by-case analysis.

In any event, for new contracts, we are ensuring that pandemics and epidemics are added to force majeure clauses. One can also add quarantines to the list. When drafting a clause, the language should cover both delays as well as the failure to completely perform. Care should be taken to specify how a party is to notify the other party of a delay or failure due to a force majeure event. If the clause refers to a notice provision in the agreement, you will want to ensure that the notice provision is accurate and reflects reality, and this would, for instance, include removing antiquated facsimile notices.

Additionally, when negotiating new agreements, particularly any supply agreements that require a customer to purchase all of its products or parts from the vendor, the customer should be able to purchase those products and parts from a second source. Having such a clause works as a future mitigation effort if there is any catastrophic force majeure event that prevented the vendor from supplying its products to the customer.

For online businesses, now is a good time to refresh your standard online contracts and terms in general. With recent cases providing further guidance on the formation and validity of online contracts, businesses should also evaluate the method (including placement) and language employed when requiring users to agree to their terms of use/service and other contract terms. To turn back to privacy for a moment, whether your company’s terms are enforceable may also impact how some weaker aspects of your privacy and security practices are enforced against you.

Employment and Privacy

Our employment group has been extremely busy answering client questions on managing this dynamically changing situation. There are many employment issues surrounding this global pandemic in the workplace, and you can see their posts here for reference: https://www.hopkinscarley.com/blog/client-alerts-blogs-updates/category/employment-law-client-alerts.

Of course, privacy and security are extremely important right now – not just with the transition to WFH and the security issues that this creates – but because regulators continue to enforce and lawsuits continue to be filed. If Zoom is any indication of this, now more than ever, assessing where your company stands with privacy and security should be a key priority. Our next post will follow shortly.

Corporate, Financing and M&A

In the past week, our corporate group has been advising clients on the CARES Act, including, the paycheck protection program. See here for that post- https://www.hopkinscarley.com/blog/client-alerts-blogs-updates/post/access-to-cash-key-provisions-of-the-cares-act.

Venture-funded companies can obviously expect the board and investors to take a much closer look at the company’s financials. Investors will want to better manage burn rates, and implement short and long term cost saving solutions. Among high costs for many organizations are outside counsel fees, and many clients have already begun to engage medium-sized law firms, such as Hopkins & Carley. With lawyers of the same (or a higher caliber), lower billing rates and streamlined teams, mid-sized law firms offer more bang for less buck, companies would be well poised to reevaluate whether they wish to continue with the big law billing rates and practices that they were willing to put up with in better economic times. For a sense of how much of a difference this can mean, first-year associates at some of the largest firms are billed out at higher hourly rates than experienced senior associates and, in some cases, partners of mid-sized firms – many of whom have their own big law experience.

On the M&A side, looking at the statistics from the Institute of Mergers, Acquisitions and Alliances and elsewhere, we see a trend where M&A takes a sharp downshift in the year of the downturn (e.g. 2001, 2008 and 2020) and then creeps up rather swiftly the following year. With COVID-19 being such an unprecedented triggering event for a down economy, and with some industries at a complete standstill for months to come, it remains to be seen what the effect will be on M&A.

Until next time, be well.