The COVID-19 coronavirus pandemic has up-ended businesses all over the world with frightening speed. Freedom of movement restrictions, quarantining, and shutdowns are happening each day. Supply chain disruption - from manufacturing to distribution to consumption - is commonplace. In addition to the significant human toll of the pandemic, businesses are also facing challenges as they focus on their economic health in these times of crisis.
Companies around the world are finding they can no longer perform their contractual obligations because of shutdowns, travel restrictions and bans that are being implemented in an attempt to “flatten the curve”. On the other side, customers are finding their suppliers are having difficulty fulfilling orders or providing services, which in turn has flow on effects to those customers’ customers.
A contract management system is not the first thing that comes to mind when you think about crisis response, but the fact of the matter is that legal teams around the world are scrambling to understand the legal ramifications of an inability to perform contractual obligations.
As a result, there is a lot of focus currently on force majeure clauses. Does the pandemic constitute a force majeure event under a contract? If it does, are there any notification requirements? Can a contract be terminated if a force majeure event continues for a certain period of time? Can you even quickly find all the contracts that you need to review?
So, then, how would you respond to the instruction: “Go and review the force majeure clauses of all our customer contracts”? In a situation where hours count, a good contract management system can turn a task like this from taking days to hours.
Without a contract management system, a lawyer would have to locate all the relevant contracts, review each one of them to locate the force majeure clause, copy out its definition, analyze it, and then record somewhere what the implications are and what action needs to be taken. This is all extremely manual.
With a contract management system, all of these steps - except for the legal analysis part - can be handled in seconds. For example, with a single search, you should be able to extract the force majeure clauses from hundreds or thousands of contracts, whether those clauses contain the phrases “acts of God” or “force majeure” or other similar wording.
This lets lawyers do what they do best - legal analysis, and not sorting and searching through pages of documents. Being able to dramatically reduce the time needed to perform this task lets legal teams be much more responsive to anxious internal clients, and enables them to quickly triage their contractual obligations and understand and plan for the impacts on their organization.
With a contract management system, the results of the legal analysis can also be stored within the system for future reference so that when the dust clears, businesses can revisit contracts with deficient force majeure clauses and attempt to negotiate updates. (You can bet that the word “pandemic” will start becoming a standard inclusion in force majeure clauses.)
The speed of the COVID-19 pandemic has been alarming, but it’s not only global health crises that cause a legal team to urgently spring into action. Even more mundane events like a sudden change in law, a surprise court ruling, or a data security breach can create crisis within a company that legal teams need to deal with quickly. And where contracts need to be reviewed, obligations analyzed, and changes negotiated, contract management systems can be an ally to legal teams by alleviating their workload in a time of stress.