Giving Notice Under Contracts During the Coronavirus Pandemic
Music conductors have one of the most challenging jobs in an orchestra. Orchestra musicians mostly need to keep track of their parts. The conductor needs to keep track of everyone's parts.
Therefore, instead of reading music with just one line of notes, conductors have an entire musical score. A score includes everyone's parts. If you've taken piano lessons and found it challenging to keep track of the left and right hand parts on two staves, imagine being a conductor and having to read 15 or more staves for a full orchestra.
Unlike orchestra musicians, who get to sit down (unless they play string bass or percussion), the conductor has to stand up. Plus, conducting is hard physical work. The conductor gets a full-body workout. And the conductor never rests. Most orchestra parts allow other musicians at least a few rests where they can put their instrument down during the piece.
Musicians convey their musical messages with their instruments. The entire orchestra is the conductor's instrument. A conductor needs to convey their vision for the piece to the musicians so the musicians can understand. Conductors communicates with the orchestra through arm and body movements.
Contracting parties need to communicate with each other, also. Informal communications may be via text message, in person, or email. But sometimes, the parties need to relay formal notifications. The process for those notifications is in a notice clause.
This article is part of a series discussing coronavirus ("COVID-19") and real estate law. Previous articles are available in my Bach to Business blog. This article discusses how COVID-19 impacts contract notice provisions.
What is a Notice Clause?
A notice clause describes the process parties must use to provide formal notice to each other. As I discussed in my previous article Read Your Concert Program Booklet and Your Boilerplate Notice Provisions, most notice clauses include the five W's and the H used in writing:
WHO is to receive the notice
WHAT notice is permitted (written or oral)
WHEN a notice is effective (upon receipt or some other date)
WHERE the notice is sent
WHY a notice is sent (contract provisions requiring official notice)
HOW the notice can be sent, such as U.S. Mail, FedEx, email, fax, personal delivery, and HOW the parties can change their notice address.
Why the COVID-19 a Change in the Notice Clause
Due to COVID-19, parties may need to change where notices should be sent and how they are sent. For instance, California's governor has ordered that 40 million California residents not working in exempted businesses remain in seclusion. As COVID-19 spreads, other governors likely will do the same.
Although some businesses may slow with COVID-19, many businesses will continue – just with people telecommuting. And real estate owners need to continue to maintain their real estate and pay mortgage payments. Yet, if a business's or real estate owners' offices are closed, that is no longer an appropriate place for notices to be delivered.
Preparing for a COVID-19 Seclusion Order
Businesses that aren't yet telecommuting still should inventory their contracts and note the who, what, when, where, why, and how of the notice provisions. Businesses should consider the appropriate place for the business to receive notices if their offices closed. Businesses should assume that employees eventually will be subject to a seclusion order and cannot go to the office.
Frequently, the best place for notices to be sent to assure they are seen will be an executive's residence. Where that is the case, businesses should have at least two people to receive notices in case one recipient becomes ill and cannot attend to the notice. Those individuals should be in two locations if one location is under quarantine.
Business owners may think they can send someone into the office to check mail daily. But that individual might not be at the office at the exact time the mail or FedEx are delivered.
Businesses may not receive certified mail or FedEx deliveries where a signature is required. Plus, it's a matter of corporate social responsibility for businesses to facilitate seclusion for all employees, so they and the community remains safe.
With that preparation, the business should determine how the contract requires notification of a new notice to be delivered. Even if the business does not yet need to change its notice address, it should have the communications making those changes prepared and ready to go. There may not be much time before a seclusion order goes into effect after it's announced.
If a contract doesn't allow email notices, businesses should ask other contract parties to allow delivery of notices via email. It may be difficult for parties to mail notices or to get them to FedEx.
Business owners might think they can rely upon mail or FedEx forwarding options. While those might be good backups for small businesses they aren't practical for large businesses, since frequently, ALL business mail must be forwarded to the same address. Plus, even for small businesses, it might make sense for different notices to go to different individuals based upon their job functions.
Although there is no indication, COVID-19 will disrupt delivery services, FedEx or the United States Postal Services might experience disruption or suspension of services. Changing how notices may be delivered may require a contract amendment. Therefore, those contract changes should be made now.
Importance of Planning Ahead for Contract Notice Changes
Proper planning can make the difference between a business surviving or failing during the COVID-19 pandemic. COVID-19 has caused the stock market to plunge. Although some businesses remain strong, other businesses expect a considerable reduction in revenue.
Some of these businesses won't be able to pay their debt. When a business doesn’t make debt payments, lenders usually must send default notices. Other businesses may not be able to perform under contracts. They may declare a force majeure and need to send a notice to the other party.
The sooner business owners start a dialogue with lenders or other contract parties, the sooner they can resolve the issues. But if the receiving party hasn't updated its notice address, it won't receive these important notices.
Some people may believe the COVID-19 pandemic is exaggerated or that the fear is overblown or that people who aren't "high risk" need not worry. Epidemiologists and other experts recommend social distancing and seclusion by everyone. They point to the different outcomes between St. Louis and Philadelphia during the 1918 flu pandemic as evidence.
Like a conductor guides an orchestra, business owners guide their businesses. A Conductor is responsible for providing excellent guidance and foreseeing and preventing a bad performance. If the conductor fails at their task, the entire orchestra's reputation is harmed.
Whether businesses believe that the risks are real, they owe it to their businesses, investors, and employees not to take unnecessary risks. If COVID-19 isn't as bad as predicted, there is little harm in being prepared. But if the forecasts are correct, the consequences of not preparing could be dire.
© 2020 by Elizabeth A. Whitman
Any references clients and their legal situations have been modified to protect client confidentiality
DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it unless a written contract is signed by all parties and any conditions in such contract are satisfied.