April 2020 a time for SME's, Medical and Dental Practices to review their contracts:

I live next to an auction yard. It pains me to see repossessed office furniture and fittings sitting forlornly in the sun. Many of the owners of these items failed to pay their suppliers and Landlords on time.

One thing the current information storm has taught us is that we can never be fully prepared for what life will throw at us. As small businesses, we have entered into several contracts with staff, suppliers and clients. Some of these are written and many are verbal. The verbal contract can be  terminated at will. Communicate this termination properly and on time. It is the right thing to do. The written one can be presented in a court of law if you can find one open in Kenya at this time. The fact that courts are not open doesn’t stop contracts from being binding on both parties. You have a contract with the landlord of your business premises for example. You must pay whether or not COVID 19 forced you to close for the better part of March or not.

In legal contracts there is a clause called force majeure which means unforeseeable circumstances that prevent someone from fulfilling a contract. Take a good hard look at your contracts to check whether this clause is indeed in your contract. Get a Lawyer to go through each contract and especially your office lease. This is the best time to renegotiate if your lease is about to end.

The Nairobi Law firm of Bowmans has the following advice for contractual parties

• New Contracts: Depending on your contractual position (for example, as a supplier or a customer), ensure that your new contracts have a boilerplate clause on force majeure and consider whether the clause should include pandemics or curtailment of transportation services or utilities as a supervening event. Ensure that the clause provides for a notification requirement and deals with the issues that may arise if a force majeure event (such as COVID-19) occurs e.g. care of the project pending completion works. On the other hand, you may also rely on breach of contract where the contract does not contain a ‘force majeure clause’ and the counterparty does not or delays the performance of their contractual obligations.

• Existing Contracts: Parties should review their existing contracts to identify whether their force majeure clause covers pandemics such as COVID-19 and the notification requirements and remedies agreed between parties. In the event that the contracts do not have provision for pandemics, parties should initiate mitigation measures such as amending/varying or entering into consensual agreements on potential liabilities that may arise. In addition, businesses should initiate the force majeure requirements under their existing contracts such as notifying their counterparties, in the event of delayed or impossibility of performance.

• Commercial Mitigation: Parties should take pro-active steps to mitigate their commercial risks as a result of COVID-19 event and prepare for the interruption of their operations or those of their commercial counterparties arising from impossibility to perform existing contracts.

Your take home:

The advice on new contracts is sound – have a "force majeure' clause and ensure that pandemics are mentioned in the clause

Existing contracts need to be reviewed and renegotiated

Commercial risk mitigation will require you to insure the risk of contractual interruption.

Meanwhile stay at home, wash your hands frequently and go through each of your contracts