Since the (economic) impact of COVID-19 on society and business is yet unforeseeable, we are all going through a period of uncertainty. The necessity of overview, insight and control over your legal obligations and contractual body is hence inescapable. Triaging your contracts enables you to anticipate and prioritize, and thus prevent issues from arising in these fast-changing times.

In order to get you started, please find below guidance regarding the contractual triage, the possibility to use automated contract management tools, a note on the human factor and to close of: next steps to consider

Triage your Contracts
Start with the question: what if contractual obligations can no longer be fulfilled under the current circumstances? This question rises due the cancellation of events, declining market demand and supply chain issues among several industries. To minimise the long-term impact of COVID-19 on your business, it is important to consider the legal position of your business, today and in the future. Deciding how to get started with managing your contract portfolio is not easy, and it gets even more complex when you do not have oversight, and different approaches exist regarding pre-existing, renegotiated and new contracts.

The considerations below may provide an overview of contractual obligations, rights, and potential risks your business may face.

1. List all your contractual obligations
• Create an overview of your current contracts and list your obligations, rights and liabilities pursuant to the contracts;
• Classify whether and which General Terms & Conditions apply to the contracts;
• Make an overview of any written or oral agreements made after conclusion of the contracts.

2. Flag business-critical obligations and applications
• Distinguish between obligations and applications that, e.g. in the event of non-performance or reduced availability, are a threat to the continued existence of your business.

3. Highlight the rights and obligations due and payable
• Create insights on which obligations are immediately due and payable, and which can be suspended, decreased or terminated prematurely;
• Additionally, determine whether you are entitled to delivery of certain goods, services and payment thereof.

While triaging your contracts, the high-level considerations listed in the contractual checklist may be of value (a full checklist is available here). The following contractual options are included: majeure, unforeseen circumstances, suspension, termination for convenience, termination for cause, and the penalty clause.

Adopt Automated Contract Tools
Next, businesses tend to have more contracts, with a shorter turnaround time today than before. Due to this trend, it becomes increasingly difficult for Counsels to carry out contract management entirely manually. Adopting automated contract tools may be the answer since these technical aids help to create an overview in an impenetrable collection of contracts. This is particularly convenient when the attention of your legal team goes to the daunting task of managing a small number of contracts that are significantly affected by the current pandemic. While lacking the time, manpower, and legal tech to manage the remaining contracts (e.g. those currently unaffected, and those that can still be performed with minor rearrangements) automated contract analysis tools, like the Legal Engine of Deloitte, take the job of managing dozens of contracts off your hands and allow you to focus on triaging those contracts that require your special attention. Allowing the use of automated contract tools in your business gives you the chance to make velocity, become cost-effective and stay in control of your legal obligations during these challenging times, and in the post-COVID-19 era.

Focus on the Human Factor
Then we recommend you not to lose sight of the human factor. Once you have mapped – manually or with help of an automated contract tool – the content of your contracts, it is advisable to shift your focus to finding the way forward (e.g. by having the conversation with your counterparty to mitigate potential risks for the purpose of future cooperation). Since unmanageable situations will occur in practice, flexibility is recommended to seek out the right moment and valuable out-of-the-box solutions.

Unlock Additional Value of Triaging
Finally, once an overview and insight in your contract portfolio is created, you could consider going the extra mile: by unlocking the additional value of triaging your contracts. Consider gaining better insight into the following: the turnaround times of your contracts, the annual price increases, earning models, and contractual optimization of IP. This contractual insight can help you to reduce costs, achieve value beyond the contract’s original scope, improve contract writing management and guarantee contractual and/or operational efficiencies.

Depending on your organization’s industry, size, and profile, it is recommended to follow a tailor-made approach to your contractual triage. For more information regarding this article, please check our website or contact us via the contact details below.

About the authors:

Peter Kits
Deloitte Global Leader Digital Law
+31 6 13001055
Peter Kits is a lawyer in IP/IT matters. His experience lies in supporting companies in legal and regulatory matters in the field of intellectual property (IP), IT, Commercial contracting and Data protection. More specifically he has gained broad experience in ‘translating’ abstract legal requirements into optimized solutions for MNE’s and SME’s. With our international group of highly skilled IP/IT legal professionals, we work in multi-disciplinary teams (Tax, IT, Risk, Audit, and Finance specialists).

Tessie Schuurs
Legal Analyst
Tessie is a Legal Analyst and is part of the Digital Law team of Deloitte Legal. She joined Deloitte in 2019. She has experience in the field of IP/IT (e.g. Cloud), International Trade/Transport, and CDD. She advises a variety of (inter)national clients with a focus on the financial services industry. Tessie has a strong interest in advising companies on complex legal matters concerning Commercial Law, Contracting and Legal Management Consulting.