Think Nicholsons

Mar 22

Making smart legal decisions in uncertain times



"Look, whatever is up there, it's better to know about it than to not know... because we don't like surprises.  Surprises are scary...we have to take a look."  
- Cormac McCarthy, The Road
Uncertain times are here, with widespread concern about the health and economic impacts of the COVID-19 pandemic.† What should we do, to make smart decisions in these uncertain times?  Here are some tips for managing your legal and business obligations:

Don't wait - start your thinking and planning early.  This doesn't mean that you have to make decisions early, or commit to actions early - but you should start thinking now, to give yourself adequate thinking and planning time.  Some tough decisions may lie ahead, and it's hard for our human brains to make good decisions under pressure, so you may need some time to come to grips with those tough issues.  Consider the points below, to help you prepare - this will help to reduce your risk of making hasty, ill-prepared decisions later. 

Assess your contracts.  Find them, read them, and ask questions about them.  Large parts of our legal system are essentially set up to enforce contracts, so make sure you know what your obligations are.  It is not reasonable to hope or assume that there will be any sort of general relief from contract obligations - our economy depends on people being able to rely on, and enforce contracts - governments will be very, very reluctant to adjust the law about this.
Note: Your 'contracts' may have all sorts of names and will be with a range of people - often with suppliers, customers, employees and others. Sometimes contracts are fully written and signed, but more often they are a mix of written, emailed, verbal and 'click-through' terms, which have been established through a course of conduct. Your business is likely to be affected by lots of 'contracts', whether or not they have formal names like 'contract' or 'agreement' attached to them.
You should identify them - figure out what their terms are - and think clearly.  There is often a gap between what you think you have to do and what you actually have to do under any contract - don't get caught out, due to your own lack of preparation or understanding. 

Consider whether you can delay, renegotiate, or stop your obligations.  
  • Do you have a right to extensions of time under a contract?  Consider using that right - but you must do it properly. (The contract will usually tell you how to use an extension right - take care to follow any required steps thoroughly, and ask for professional help if you need it).  

  • Is there a clause which allows you to interrupt your obligations because of unexpected events? (This is sometimes called a 'force majeure' clause, but it may not have that specific title, or those rights may be found in other sections of a contract). Consider whether you have the right to use that. Beware: there is usually no implied 'force majeure' clause in 'Australian law' contracts; also, these clauses will sometimes exclude financial obligations. 

  • If you are trying to renegotiate an arrangement, because you have concerns about whether you can perform - then be very careful about admitting or claiming that you can't perform. It is not safe to assume that the other party to the contract will be understanding or merciful - what you say now may absolutely be used against you later - unfortunately, that's how our economy and legal system work. The appropriate use of 'without prejudice' communications can help with this - but you can't just whack 'without prejudice' on an email and expect it to have magical effects in protecting you - ask for advice, if you need it.

  • Be very, very careful about trying to stop (terminate) your obligations under a contract - if you don't have the right to do that, then an inappropriate termination may just lead to larger, earlier, permanent problems for you.  Some contracts do have rights to terminate 'for convenience', or similar provisions - you should look into that.

  • Even if you do have a right to delay, extend or terminate - you will need to use careful business judgement about whether you should use those rights. Try to think about the medium-term and long-term consequences of any choices you make now.
Keep records and evidence. At some stage - and this could be months or years in the future - you may have to prove that your decisions and actions were rational, proportional and valid.  This may require you to prove that certain circumstances existed, or that you did everything you could to manage a problem.  It is essential that you be able to demonstrate what you did, and why. For that - you need paperwork, photographs, documents and evidence.  Start keeping it, in an organised way, now.

Ask for help if you need it.  This might be help from a friend, a spouse, or someone else you trust.  Sometimes you might need professional help - an experienced professional, who has seen tough situations (though perhaps not quite this type!) before, can be a great resource.

"His dreams brightened. The vanished world returned."
-
Cormac McCarthy, The Road
People are full of creativity and inventiveness, and business will go on.  As you move forwards, come up with new ideas and exploit new opportunities, remember these recommendations for future actions: 

Choose the right structure.  It's usually very cost-effective to set up a company (or a company and trust) and the tax, liability and other benefits of doing that can be huge.  There are several good online providers of companies and trusts - my preferred one is ACIS.

Protect your brand.  Check that you can actually, reliably, use the name and brand which you intend.  Start with a trademark search at IP Australia - it's almost useless to start registering business or domain names, unless you've looked carefully at TMs first.  Once you've looked - go ahead and apply for the TM which you want to use - this can be done online.  Don't wait - do it straight away.  Applying for the right TM at the right time is a powerful tool for all levels of business.

Secure your position.  If you're lending your hard-earned money to your new venture, as so many of us do - then do it properly.  Have written terms, and security (at the very least, establish a written security agreement and make a PPS registration).  It's short-sighted and foolish not to do at least that much. 

If you'd like to talk about any of these recommendations, or need help implementing them, then please call or email Stephen Robertson, or one of our other highly experienced, commercially focused lawyers.
 

Stephen Robertson

Partner
Stephen is a commercial lawyer with extensive experience in advising businesses in areas of acquisitions and divestments, commercial agreements, structuring, legal risk and revenue issues. He also advises on property law, with a focus on commercial and industrial property.



† At the date of publication, 793 people have died in the last 24 hours in Italy from COVID-19 Coronavirus death toll surges in Italy and Spain