Document Type

Article

Publication Date

4-1-2021

Abstract

COVID (2019) rendered many contracts in or near breach. If commercial actors in these circumstances marshaled their presumptive legal rights—whether to sue or to shelter in bankruptcy—the result could be catastrophic for the legal system and for an economy that is increasingly interconnected through contract. The fact that the economy might revive quickly would mean that terminating relationships through litigation could be especially wasteful. Responses to COVID’s effect on contract have focused largely on public interventions such as government mandates and subsidies, as well as adjudication. This essay explores the important but underappreciated role that private ordering can play through the use of standstill/forbearance agreements (“SFAs”) as supplements to, or substitutes for, public action. Under an SFA, parties agree not to take legal action until some defined period of time has passed or a stipulated exit event has occurred. SFAs can address problems of enforceability, network effects, and exit created by COVID across a broad range of commercial contracts. This essay explores their use through consideration of a model published with the Business Law Section of the American Bar Association.

Publication Title

Business Lawyer

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