“For the past three months there has been a lot of information about Covid-19.  What is not clear is how insurance policies, in particular, commercial insurance policies do or do not provide coverage for losses experienced because of Covid-19 or government reaction to Covid-19,” discusses Mark S. Humphreys in his Dallas Fort Worth Insurance Lawyer Blog.

“In the wake of government orders shutting down or seriously limiting the operations of businesses to deal with the COVID-19 outbreak, many affected businesses have turned to their insurers for coverage.  This has led to a flurry of lawsuits across the nation seeking rulings that such claims are covered and asserting that the failure to accept such claims constitutes breaches of contract, bad faith, and other common law and statutory violations.”

“Perhaps anticipating that courts may find these purported losses not covered under applicable policies of insurance, insureds have begun to look elsewhere for relief, including to insurance brokers, as demonstrated by three recent lawsuits: Sean Boutros, M.D., P.A. v. Sentinel Insurance Co. Ltd., John’s Grill v. The Hartford Financial Services Group, Inc., and Ybarra Investments, Inc. v. Scottsdale Insurance Company.  In all three cases, insureds sought business interruption coverage after their businesses were forced to shut down due to COVID-19, and all three sued the insurer and the broker through which they purchased the insurance.”

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“If you sue someone for fraud, you can win punitive damages in addition to regular compensatory damages,” explains Lee E. Berlik in Berlik Law’s Contracts.

“If you’re suing only for breach of contract, punitive damages are a no-go. As punitive damages can add up to $350,000 to the value of the plaintiff’s claim, plaintiffs naturally try to add fraud claims to their breach-of-contract lawsuits whenever possible. The “source of duty” rule, however, limits the circumstances under which plaintiffs can pursue such a strategy. The rule provides that tort claims (like fraud) can only be pursued if the source of the duty allegedly breached is the common law and not a contract entered into between the parties. The Virginia Supreme Court has clarified in recent years that if a fraudulent misrepresentation is made within a contract, the plaintiff is limited to contract remedies, but if a misrepresentation is made for the purpose of inducing another party to enter into a contract, a separate fraud claim can be pursued.”

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“When you organize a company, the language may be English, but the jargon sounds ‘foreign’ like you are playing a card from Dungeons and Dragons for an invincibility cloak. Wading through the lingo, one particular term you may encounter is ‘juridical entity,'” is discussed in IncNow’s blog.

“While ‘juridical’ simply means ‘legal’, knowing the characteristics of a juridical entity is helpful to know. Juridical entities are created by each state’s law to give a basket of rights normally associated with humans to non-human business entities. The law also gives rights that are often associated with property to the business entities, such as alienable ownership (the ability to sell/transfer ownership in the company).”

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“With the vast majority of CEOs expecting their business models to change over the next three years, it’s no surprise that digital transformation (DX) continues to be a strategic priority for organizations of all industries and sizes. But what does DX mean for legal teams and what is their role in the execution of it?” asks David Parks in Legal Reader’s Business.

“A big part of that answer is centered around the concept of digital contract transformation (DCX). DCX is all about the digitization of contracts and contract lifecycle management (CLM) processes. DCX is a foundational element of an organization’s broader digital transformation strategy because it not only modernizes their contracting efforts, it enables them to harness the data in their contracts to deliver actionable business insights which is the heart of digital transformation.”

Parks discusses ten best practices that legal teams can implement to help achieve a successful digital contract transformation.

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“Stores, restaurants, bars, and other customer-facing business owners are in various stages of reopening around the country and facing a patchwork of regulations and recommendations for dealing with the ongoing pandemic.  Many are rightly concerned about liability to customers based on exposure to COVID-19,” discuss Damon Suden and William Pierotti in Kelley Drye’s Client Advisory.

“Exculpatory agreements are contracts whereby one party waives their right to sue the other party on certain grounds, negligence for example. While every business should ensure that they are taking the responsible and appropriate steps necessary to protect their patrons, under the right circumstances the use of these agreements could provide some much needed protection.  Exculpatory agreements may not be appropriate for every business, but for businesses that can and wish to use them, they can help minimize risk in a time of high risk and great uncertainty.  Pairing these agreements with an arbitration clause or class action waiver could further fortify a business against expensive litigation as they navigate rebuilding.”

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“Buyers in M&A transactions should consider a number of due diligence items in response to COVID-19 and the governmental response thereto,” write Thomas W. Christopher and Alexander B. Johnson in Harvard Law School Forum on Corporate Governance.

“As parties pursue mergers and acquisitions transactions during, and in the wake of, the COVID-19 pandemic, both buyers and targets should consider a number of factors from a due diligence perspective, including the impact of COVID-19 and related developments on the target from a legal, compliance, human resources, business, insurance, financial, and operational perspective. This post identifies some of the issues buyers should consider when undertaking legal due diligence in connection with an M&A transaction, and highlights for targets some of the types of due diligence questions they may need to address.”

“As with any due diligence investigation, due diligence related to the COVID-19 pandemic should be tailored to the particular target company. Accordingly, the applicability of each of the topics discussed below will likely vary based on the particular target company, its industry and geography, and a number of other factors.”

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“A Case Study in How to Avoid Disaster.”

“The seminal moment in any real estate transaction is when the purchaser has been cleared to close by their lender, thereby removing, in most transactions, the last bar on the way to a successful closing. However, just because the lender has issued a clear to close letter, it does not mean the contractual finance contingency has been satisfied,” writes John Heneghan in Fornaro Law’s Case Study.

“The death of your deal may be, truly, in the details of that clear to close letter.”

“There is no such thing as an ‘unconditional’ clear to close letter. All clear to close letters come with ‘subject to’ conditions that must be satisfied before the loan is actually cleared to close. It is a misnomer to say that a loan is clear to close unless these ‘subject to’ conditions have been satisfied. The clear to close letter must be read carefully to make sure it satisfies all aspects of the financing contingency requirements so there is no threat of your client being in breach of contract.”

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“The new norm of social distancing, and a recent decision out of the Eleventh Circuit Court of Appeals, are changing the way arbitrations are conducted. Now is the time to update the arbitration provisions in your contracts to take advantage of these changes the next time you have to arbitrate a dispute,” writes Henry R. Chalmers in Arnall Golden Gregory’s News & Insights.

“The standard arbitration hearing has always involved the parties, attorneys, witnesses, and arbitrators together in the same room, similar to an informal trial setting. The COVID-19 pandemic may change that for the foreseeable future. Just as businesses are transitioning away from in-person conferences and towards Zoom meetings, so too are arbitration hearings.”

“The Rules for many arbitration tribunals—like the American Arbitration Association and JAMS—allow arbitrators to decide whether to hold hearings in person or via video conference, unless the parties have agreed otherwise. So, the next time you negotiate a contract with an arbitration provision, think about whether it would be to your advantage to require that disputes be arbitrated in person or remotely, then draft that into the contract.”

Chalmers provides a few things to consider in making this decision.

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“Much has been said about due diligence when investing in or acquiring a software-as-a-service (SaaS) business. However, the increased reliance on cloud-based technology in today’s remote world makes it critically important for a SaaS customer to be able to quickly identify the important contract provisions that will lead to receiving value from the customer’s technology spend. This post provides key areas of focus when you are contemplating acquiring access to technology provided as SaaS,” writes Matt Hafter in Thomas Coburn’s Publications.

“Before clicking ‘accept,’ your business and IT teams should consider the following … about the proposed SaaS terms:
1. Scope of services
2. Permitted use and users
3. Testing and acceptance
4. Warranties and service level commitments
5. Data usage and security
6. Other important vendor obligations
7. Liability caps and exclusions
8. Intellectual property
9. Termination
10. Escrow”

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“At the Academy’s recent Virtual Summit, I spoke, among other things, about the rising importance of your clients’ advance directives during this coronavirus crisis. Here is a piece of what I shared,” writes Randi Siegel in American Academy’s Client Services.

“Why have advance directives and access to them become more crucial during Covid-19?”

“Because the novel coronavirus is so contagious, your clients will be alone in the hospital if they have Covid-19, and may be alone even if they do not have Covid-19. (Hospitals need to protect visitors from contracting the virus and also from visitors potentially spreading the virus within the hospital.)”

“Without visitors, your clients’ family can’t talk with the doctors right away, in person. They can’t tell the doctor who is the health care agent, or provide any other pertinent medical information about the patient.”

“Without visitors, doctors can communicate with family only by phone and video chat. It can be hard for doctors to know the phone numbers for family members even if they do know whom they’re supposed to talk to.”

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Jonathan Chisholm of InfoGoTo discusses “how innovators and developers can protect their intellectual property in the form of trade secrets, and how a date- and time-stamped audit trail of their IP development can be protected by a trusted third-party.”

He analyzes four method of IP Protection: Patents, Trademarks, Copyrights and Trade Secrets to help protect the idea with reasonable efforts.

It’s not easy bringing an idea to life but protecting these ideas (in the form of trade secrets) can be.

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“Virtually every aspect of our lives has been disrupted in one way or another as a result of the COVID-19 pandemic and the ensuing economic collapse,” write Timothy P. Van Dyck and Andrew C. Bartholomew in Bowditch Attorneys’ Publications. “While certain of these disruptions have been difficult to predict, at least one has not: a huge uptick in commercial disputes.  Simply by way of illustration, disputes implicating force majeure clauses (where, for example, a party’s performance of its obligations has been frustrated by an interruption in the supply chain or an inability to access the labor market) have already begun to materialize.  And just this week, a major restaurant chain sued its insurer for rejecting its damages claim stemming from the pandemic, alleging that its “all risks” policy covers financial losses after Massachusetts and other states ordered restaurants to close except for takeout service.”

“With most courts closed to the public and facing a backlog of cases when they eventually reopen (where criminal matters will undoubtedly take priority), many parties who find themselves immersed in these disputes will likely seek out alternative dispute resolution and, in particular, the use of arbitration.  In the post-pandemic world, parties need to be prepared to avail themselves of the benefits of arbitration by crafting thoughtful, tailored arbitration clauses to ensure that their disputes are resolved cost-effectively, fairly, and with as little business disruption as possible.”

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“The coronavirus pandemic has no doubt caused many businesses – particularly smaller and mid-sized businesses, and those in industries more negatively affected – to take unprecedented action just to survive. For many businesses, a nationwide lockdown has caused them to revisit all of their contracts to determine how the pandemic will impact their business agreements, and what happens if they aren’t able to perform as agreed,” reports Sullivan Worcester ‘s News.

“Strategies have included cash conservation (to the extent businesses have cash on hand) or defaulting on performance, payment or collection obligations under existing contracts. In response to the measures being taken, it is likely that legal action will follow in the form of collection actions or other lawsuits and bankruptcies; even where payment obligations are secured, it is unlikely that exercising those rights would give meaningful recourse to a secured party in this environment.”

“In response to these issues as they arise in this particular environment, a standstill agreement might be an appropriate solution. Using a standstill agreement provides a temporary workout between parties can help avoid defaults under contracts and the ensuing consequences, all while preserving existing business relationships, so as to avoid these potentially fatal pitfalls.”

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“Clear contract language is important.  While clear contract language is important in all cases, it is especially important when it comes to determining how you are to get PAID for your work.  An ambiguity with respect to the manner in which you get paid is counter-productive.  Likewise, not appreciating clear language in your contract regarding the manner in which you get paid is counter-productive.  If you are doing unit cost work where you are getting paid based on a defined measurement, you want to understand how that measurement is calculated,” reports David Adelsten in Florida Construction Legal Updates.

“In a dredging dispute before the United States Court of Federal Claims … a contractor was hired by the government to dredge a creek.  The contractor was to be paid a unit cost for dredging based on a comparison of before and after survey data.  In particular, the contract stated the contractor would be paid ‘measured by the cubic yard in place by computing the volume between the bottom surface shown by soundings of the last surveys made before dredging, and the bottom surface shown by the soundings of surveys made as soon as practicable after the work has been completed.'”

“A dispute arose when the government paid the contractor for 46,065 cubic yards of material removed from the creek. The contractor claimed it was underpaid.”

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“As a general matter, the federal government cannot be sued for damages without its consent. Congress has waived its immunity through several statutes. For example, the Federal Torts Claims Act provides a limited waiver of sovereign immunity for certain types of torts. And the Supreme Court has also implied certain waivers of sovereign immunity. Through so-called Bivens claims, plaintiffs can seek monetary damages for violations of the Fourth and Fifth Amendment. But the Supreme Court has held that there is no waiver of sovereign immunity for suits based on other provisions of the Bill of Rights, such as the Eighth Amendment. And in recent years, the Supreme Court has put the brakes on future Bivens claims. This much is straightforward doctrine,”discusses Josh Blackman in Reason.

“But what about the Takings Clause? It is the only provision of the Bill of Rights that clearly states landowners are entitled to monetary damages: ‘nor shall private property be taken for public use, without just compensation.’ Is the Takings Clause a self-executing waiver of sovereign immunity?”

“In traditional eminent domain questions, the issue of sovereign immunity is irrelevant. Why? The government initiates a condemnation proceeding against a landowner. In other words, a private landowner does not need to sue the federal government. But there is another common type of takings case, known as an inverse condemnation suit. Here, the government regulates a person’s property, but insists there is no taking. Then, the landowner sues the federal government, alleges a violation of the Takings Clause, and seeks ‘just compensation.'”

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“This is a frustrating time for small businesses. Many employers are trying to figure out how to cut costs and keep their businesses afloat during the on-going Covid-19 crisis. Employers are wondering how to manage their payroll when facing decreased revenue – some employers are in the undesirable position of having to reduce employees’ hours or, in some cases, end employment contracts. Given the unprecedented and unforeseeable long term effects of Covid-19 on business revenue, some employers may be wondering about ‘frustration’ of employment contracts,” writes Zoë Roberts in Minken’s Covid-19 Center.

“‘Frustration’ of a contract occurs when, through no fault of either party, the contract becomes impossible to fulfill. This might be, for example, because of a natural disaster – if a fire completely destroys a concert hall, the venue cannot fulfill a contract to have a band perform there. In other words, if an unforeseen event renders it impossible for the contract to be performed as initially agreed, the contract is ‘frustrated’ and both parties are released from their contractual obligations.”

“This concept is important in employment law because, generally, employees are not entitled to notice of termination or termination pay under the Employment Standards Act, 2000 if the employee’s ‘contract of employment has become impossible to perform or has been frustrated by a fortuitous or unforeseeable event or circumstance’.”

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“The current market volatility arising from the restrictions imposed to reduce the risk of spread of COVID-19 has led many market participants to consider their position under existing contractual relationships, including, assessing their own obligations and whether any potential or actual event of default has occurred in respect of their counterparty. This memo illustrates practical issues to be taken into account by a counterparty to a financial contract in making these considerations using, as an example, a derivative transaction,” discussed in Cadwalader’s Resources.

“The impact of COVID-19 has led to unprecedented measures being put in place in many jurisdictions around the world which have, or may in the future have, the effect of closing markets in a variety of locations. These closures, and the location of the markets which are subject to closure, will need to be carefully considered to determine their impact on a party’s position under a financial contract.”

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“Often included in long-term outsourcing/managed services agreements but sometimes overlooked as a contractual right, in this post we look at benchmarking provisions, including what benchmarking is, common rights and restrictions, and other considerations for customers and suppliers,” writes Vito Petretti and Oliver Bell in Morgan Lewis’ Blog.

“What Is Benchmarking?”

“Benchmarking provisions grant the customer a right to appoint a third-party organization (the benchmarker) to undertake a review of the price and/or the level of service that is being offered by the supplier under a contract as compared to the price and/or level of service offered by comparable suppliers for comparable services.”

“Benchmarking provisions aim to give the customer the right to ensure that the services it receives are a ‘good value’ (as defined by the parties in the agreement).”

“How Does It Work?…”

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“The current outbreak of the coronavirus (also known as COVID-19), recognized by the WHO as a global pandemic, has already had a significant effect on certain businesses and appears likely to have an even greater impact, raising concerns about parties’ ability to meet contractual obligations and parties’ willingness to perform obligations where it is no-longer commercially beneficial to do so,” discusses Paul Rosen, Edward A. Tran and David Wood in The National Law Review.

“Unique and critical considerations are raised for parties to M&A transactions operating in these unchartered waters, both those who exchanged on a deal before the crisis unfolded which is yet to complete and those looking to enter into a transaction in the near future. With a focus on M&A agreements governed by English law, this advisory summarizes the concept of force majeure and discusses whether force majeure clauses in contracts could be triggered by the ongoing coronavirus outbreak and the global containment measures imposed. Frustration, an alternative legal avenue for relief from contractual performance is also discussed and practical steps parties may wish to consider are set out.”

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“With precedent being the bedrock of the legal industry, lawyers sometimes fall into the trap of mirroring conventions that they have observed other lawyers follow. Many times, this mirroring occurs without much thought by the writer about the value of the convention. Instead, the writer simply takes for granted that the convention is the ‘right’ way to do things because someone else has done them that way,” warns Andrew B. Schrack in Butler Snow’s BizLitNews.

“Such conventions are not necessarily incorrect, but they last long beyond their usefulness. One (1) such outdated convention is the doubling words and numerals, as illustrated in this sentence. It is completely unnecessary in typed documents.”

“The convention originated with handwritten documents, in which it was easy for numbers to be confused. (I’ve personally had my scribbled ‘9’ mistaken for a ‘7’). Numbers also could be altered easily by inserting extra numerals or attempting to transform a 3 into an 8. In fact, the easy alteration of numerals is the reason that we spell out the numbers on our checks (for those of us who still use checks). Still, numerals are easier to read at a glance, and so early legal writers included both.”

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