A Look into Lease Contracts Non- Performance in COVID -19

In the wake of the ongoing pandemic COVID-19, governments have mandated for the temporary closure for non-essential commercial business activities, to control the rising numbers of COVID-19 positive cases and keep people safe. This measure, however, has put an enormous burden on people leasing and renting commercial establishments. With now everyone being in incessant lockdowns it becomes more speculating for tenants and owners on how they approach this issue from contract management services sides in a way that benefits to all.

The plausible reasons anyone under lease contracts will encounter are:         

Businesses have slowed down or completely shut down depending on places putting their lease obligations in a state of turmoil.

Currently, owners and tenants are in a vicious circle of non-payment of rents resulting in non-payment to bank lease loans for owners.

Both the above situation has led both tenants and owners to review their lease contracts and find ways to make it work or check for eligible exemptions from this legal obligation in these unprecedented times.

To get your contract defenses up to tackle and manage your current non-performance of lease contracts, there are 3 ways to proceed to a solution on this:

Force Majeure

Force Majeure clause is prior inserted into the contract management services agreements to protect parties from non-performance or delay in unforeseeable uncontrollable or disaster like situations. COVID-19 pandemic is not allowing many to perform to their contractual obligations.

The Doctrine of Impossibility

The Doctrine of Impossibility as the name suggests will be applicable when any side of the contract will become impossible to perform.

Frustration of Purpose              

The Frustration of Purpose will be considered by when due to the underlying circumstances, whether the purpose of the contract in itself has become void.

When for any contracts force majeure is not included in any narrow sense, the other two contract defenses will be made applicable due to any changes which were not clear cut and pronounced before, however now will be required to present the valid reasons to the court.

The above three excuses from non-performance in business and hence consequently the delay in paying rents will be applied as per the language of the contract through whether there will be delays to a timeframe or need a renegotiation of the contracts to pay for rent with a reduction to a certain percentage.

At AEREN LPO we help you in contract reviewing for the existing criteria, add renegotiation terms for the contract language, documentation, and review for all reasons that will be needed in case there is a need to provide the courts with reasons for the contract defenses and update all your renegotiated contracts in the Contract Lifecycle Management Software for your Contract Management.