Given the considerations of the parties when entering into a service contract, it is desirable for a company to enter into and commit to entering into SLAs with the contractor. If Covid-19 represents the new normal, it goes without saying that certain benefits are a priority, such as private health insurance, life insurance and permanent health insurance. The return of the company car may be less obvious, given the reluctance to use public transport. How the service contract is developed can be critical to the survival of the benefit if the employer wishes to withdraw its insurance coverage. Can the employer do that? Is the employer required to reproduce such coverage with another provider? From the executive`s point of view, that should be the case. The service contract is not the whole story. However, many businesses may be more tolerant of changes, particularly temporary changes to the services they receive under a contract. There is an element of empathy with everyone else in these unprecedented times. Another part of the underlying agreement that may be relevant is the force majeure clause, if the agreement has one. These provisions are not always designated as such and the concept of force majeure cannot always be found in one place in an agreement. Therefore, agreements should be reviewed to verify all provisions that may exempt some of its liability or liability due to unexpected external circumstances. An in-depth discussion about force majeure goes beyond the scope of this blog post, but you can learn more about force majeure here.
For the purposes of this contribution, we will find that the concepts of force majeure are generally based on one of the parties to the agreement that is experiencing the force majeure event. In the case of COVID-19, both parties attend the event. Therefore, the logical application of force majeure in this context could mean that both parties will be excused from the obligations arising from the agreement (subject to a common exemption with respect to the payment of royalties). This may not be a practical plan for the parties to move forward. While it is important for some to understand force majeure in assessing its final exposure under the agreement, it may not be so useful to guide the parties towards a practical development of the current situation. As a first step, creditors and clients must independently assess their respective legal positions. They should review the applicable agreement and law and assess the status of the work to be carried out under the agreement. This is essential to understand their legal strengths and weaknesses, which are being renegotiated, in order to identify areas of compromise and possible renegotiations, to preserve rights and, ultimately, to be prepared to take action if an amicable solution is not found.
Morgan Lewis COVID-19 Task Force and Corovavirus COVID-19 Resource Page were created to resolve the multitude of legal issues that concerned businesses at that time. In agreement with Morgan Lewis COVID-19 teams across practices and regions, Morgan Lewis` outsourcing team is at the forefront of our efforts to help clients meet the challenges of COVID 19 related to outsourcing and service management agreements.