Executive Summaries Mar 17, 2020

COVID-19: Contractual and Practical Measures to Be Taken

In early February of this year, we wrote an article about some of the impacts that the coronavirus outbreak – which at the time was mostly in Asia – could foreseeably have on Canadian companies.

At that time, we pointed out measures to be taken by these companies to limit the impact of the crisis on their business, in particular by invoking force majeure with their clients.

Today, the World Health Organization is calling the situation surrounding the coronavirus a pandemic. Since the effects of this virus, now known as COVID-19, are being felt across the country, it is clear that it will have a considerable impact on the business operations of Canadian companies. They will have to take additional measures to respond to these repercussions.

It is expected that the impacts of COVID-19 will take many forms, including the following :

  • plant closures and production slowdowns;
  • business closures and lack of customers;
  • border closures and limits on imports and exports;
  • increased prices for some goods due to rarity;
  • cancellation of orders by customers;
  • increase in payment terms;
  • decrease in the available workforce due to illness or isolation;
  • inability to hold certain meetings, including annual meetings of shareholders, within the time periods required by law.

As a business, you will have to juggle these issues while trying to maintain profitability and meet your own obligations to employees, customers, suppliers, shareholders, investors and bankers, not to mention the government and tax authorities. We refer you to the article for the employment law aspects of COVID-19.

As discussed in our previous article, there is every reason to believe that COVID-19’s impact on business operations meets the conditions for the application of force majeure, which, when defined by the Civil Code of Québec, are elements of unpredictability, irresistibility and externality. Although the current pandemic satisfies the last two criteria a priori, it could be difficult to argue that its effects were not foreseeable for contracts recently concluded or under negotiation.

On the commercial and contractual level, in order to properly target the actions to be undertaken with regard to the modulation of the obligations provided for in your contracts, certain measures are necessary :

1. Review your current contracts, identify the obligations at stake, the deadlines to be met, the penalties, the possible damages in case of delay and identify the force majeure clauses. The Civil Code of Québec defines this concept and its application, but the contract may change the definition or modify the consequences. For example, it is customary to mention that force majeure does not excuse delays in payment. It should be noted that the definition in the Civil Code of Québec will not apply to contracts governed by foreign laws.

2. For any contract under negotiation, clearly identify the elements that could be impacted by the pandemic and make sure not to waive the possibility of invoking force majeure as the situation evolves. An express mention of the situation surrounding COVID-19 in the contract to be entered into and the addition of reservations regarding the fulfillment of obligations that could be affected by it would also be prudent practices in this situation of uncertainty. As previously mentioned, the date on which the contract is entered into is an important element that will necessarily influence the possibility of invoking force majeure as an explanation for a breach of contract due to the more or less unpredictable nature of the effects of the pandemic.

3. You have an obligation to "mitigate" your damages under the law. Notify your clients, keep them informed of the measures you are taking. Don't assume that the pandemic will excuse any delay, you will need to prove that the delay was caused by circumstances beyond your control, not by your business or personal decisions, no matter how laudable they may be. Be sure to document your decisions and the facts involved. For example : Who was working on the deliverable? When did that person stop working? Why? When were the relevant health measures imposed? Was it possible to work remotely? Etc.

4. Also pull out the contracts with your suppliers. Make sure that your suppliers comply with the terms of their contracts and that they justify any delays. Also make sure that they do not abuse the situation and respect the agreed prices; some may try to increase their prices or modulate their obligations. For transportation delays, several international conventions may apply and are usually mentioned in bill of lading vouchers. However, limitations apply and your claims must be made within specific time limits.

5. Check your insurance policies and talk to your financial institution. Be aware of support measures. For example, the Business Development Bank of Canada currently offers a loan that can be accessed quickly and remotely, with a minimum of information, in amounts between $10,000 and $100,000 to support businesses affected by the pandemic. Other measures will undoubtedly follow.

6. Keep your shareholders, investors, bankers and insurers informed. In these turbulent times, they will be valuable allies.

Businesses should not wait until the crisis is over, let alone until problems arise, before taking the necessary steps to protect their business. Not only is their financial viability at stake, but it is also their responsibility to their employees, investors and other stakeholders.

To find out more about contractual issues related to the COVID-19 outbreak, do not hesitate to contact our Business Law team

Stay on the lookout!

Subscribe to our communications and benefit from our market knowledge to identify new business opportunities, learn about innovative best practices and receive the latest developments. Discover our exclusive thought leadership and events.

Subscribe

You would also like

Rencontre au Sommet

Rencontre au Sommet: Turning Economic Challenges into Collective Opportunities

lexpert

27 BCF Professionals Stand Out in the Canadian Legal Lexpert Directory 2025

Canada US flags

Customs Tariff Uncertainty: Impacts on Quebec Businesses

Analyse statistique - tarifs douaniers

Statistical analysis of the impact of U.S. tariffs on Quebec economy

Contrats commerciaux et echanges

Assessing and Mitigating the Impact of New U.S. Tariffs on Your Contractual Relationships

Directors’ Liability: Legislative Amendments Since 2022

Entrepreneurship forum

Entrepreneurship Forum: Vision 2025

Athlete

Protecting Privacy in Sports – Don’t Wait to be Caught Flat-Footed!

Tech Forum 360

Tech 360 Forum: Growth and Inflection Points

Prospera: Québec’s Economic Barometer

Canada's Best Managed Companies: BCF Recognized for 17th Consecutive Year

paul et misha

BCF Strengthens its Expertise in Artificial Intelligence

new-partners-2024

BCF Has Appointed Three New Partners

Who’s Who Legal : 5 BCF Professionals Stand Out

BCF extends its Partnership with the Canadian Association of Black Lawyers to a Third Year

Chambers Canada Ranking: Five of our Lawyers Recognized

Photo of Julie Doré

Julie Doré Takes Over Management of The BCF Business Law Firm

BCF Welcomes Five New Up-and-Coming Lawyers

Prospera – Quebec Economic Barometer

Julien Tricart, Member of the Meritas Sports Law Group

Pride Month: Let’s Create an Inclusive Future

Canada’s Best Managed Companies: BCF Recognized for 16th Consecutive Year

Securities Commissions: What are the Environmental Requirements?

Stand out in the Fight Against Climate Change

Climate Change: What are Companies Doing?

When Quantifying and Minimizing Your Carbon Footprint Becomes a Good Business Decision

Businesses: Why Should You Hire an Environmental Mediator?

Climate Change as a Strategic Opportunity: Adaptation and Eco-Responsibility for Businesses

Climate Change – What Can Municipalities do?

Directors and Officers: What Is Your Environmental Liability?

Every Woman Counts

Strategic Forum on the Role Played by Businesses in the Fight Against Climate Change

BCF Partners with the Canadian Association of Black Lawyers to Promote Diversity in Québec Law Faculties

BCF's More Inclusive Approach: Improved Parental Leave

Shaun E. Finn Appointed to the Superior Court of Québec

How to Ensure a Business Succession?

Business black folders on table

Adoption of Bill 78 on Transparency Business: Are You Ready?

Strategic Forum on Market Consolidation and Business Succession

BCF Partners with the Clinique Juridique de Saint-Michel to Promote Access to Legal Studies for Young People from Diverse Communities

BCF Welcomes Two New Lawyers

André Ryan Receives the Advocatus Emeritus Honour

Five of our Lawyers Stand out in the 2023 Edition of the Chambers Canada Ranking

Ready to Bid? Be Sure to Read the Tender Documents Carefully

43 BCF Professionals Stand Out with 78 Nominations in the 2023 Editions of Best Lawyers in Canada and Ones to Watch

Seven New Lawyers Join BCF

Adoption of Bill 96: Be Ready

Bill 96 is Passed: How Will It Affect Your Relations with Customers and Suppliers?

Pride Month: The Value of Diversity

BCF, the 3rd Largest Law Firm in Québec

Canada’s Best Managed Companies: BCF Recognized for 15th Consecutive Year

BCF Welcomes Isabelle Métivier as a Real Estate Partner

Rogers Communication Inc.’s Surreal Case – Could this Happen in Québec?

BCF Recognized by the Globe and Mail as one of Canada’s top Law Firms

BCF Welcomes Julien Lefebvre as a Partner in its Business Law Team

Chambers Canada 2022: BCF Earned Band 1 Ranking in Québec for Corporate and Commercial Law

46 Lawyers of BCF Stand Out with 83 Recognitions in the 2022 Editions of Best Lawyers in Canada and Ones to Watch

Seven New Lawyers Join BCF

What Can Be Learned from Jurisprudential Developments in Public Contracts?

escalier

BCF Welcomes Seven New Lawyers

Supreme Court of Canada Takes Another Step towards the Guiding Principle of Good Faith in Contract Performance

Achieving a Successful Business Succession: An Approach That Is As Technical As It Is Personal

Governance, a Key Element in Successful Business Succession Planning

Economic Recovery Strategic Forum

Adoption of Bill 42: Mandatory Disclosure of Nominee Agreement with Tax Consequences

23 BCF Partners Ranked in the Canadian Legal Lexpert Directory

36 Lawyers of BCF Stand Out with 52 Nominations in the 2021 Edition of Best Lawyers in Canada

50 Questions Any Newly Elected Director Should Address

COVID-19: Some Considerations in the Event of a Shareholder Dispute

COVID-19: At the Dawn of Reopening, Boards Need to Be Proactive and Involved

COVID-19: Will the Pandemic Really Have an Impact on Your Contracts?

Terranova Security Partners with Microsoft

COVID-19: When to Invoke Superior Force?

BCF once again ranks as one of Montreal's Top Employers

BCF Names 16 New Partners for Its 25th Anniversary

Sundial and Crescita Sign Exclusive Partnership to Develop Cannabis and Hemp Topicals

Are You a Leader or a Follower?Results of the Innovation Survey

Infrastructure and Major Projects: Dare to Think Big

Chambers Canada 2020: BCF Recognised in Corporate and Commercial Law

Strategic Forum on Innovation

Innovating to Survive: Are You a Leader or a Follower?

Is Your Company Implementing a New Technology System? Remember to Protect Your Data

5G Technology Is Coming: Legal Questions Abound

André Ryan: The Grand Prix Lawyer

Health Canada Is Changing its Cannabis Licensing Process

The AMP's New Extrajudicial Complaint System Is Underway!

16 BCF Partners Recognized in the Prestigious Canadian Legal Lexpert Directory

Business Transfer: Ensuring the Continuation of Your Business

What are the risks of holding cryptocurrency funds on a platform such as QuadrigaCX?

Get the latest thought leadership