Previously we reported on debtors’ appeals to bankruptcy courts’ general equitable powers for assistance in weathering the COVID-19-induced economic storm. (Our original article may be viewed here.) This trend remains and bankruptcy courts are demonstrating a continued willingness to entertain and offer such relief.
As COVID-19 spread across the globe like wild fire, many of its effects—including an economic downturn and emerging disputes risks—are being felt across markets.
The COVID-19 pandemic has led to a significant strain in the global markets. As "stay-at-home" orders are implemented globally, many economies have closed off, which has severely impacted numerous businesses. Inevitably, some companies have liquidated and many others are at risk of insolvency.
Ipso Facto is the sort of phrase people throw around when they're trying to sound more lawyery, but it's also the name of a regime that operates and affects your contractual rights when one of your contracting parties becomes insolvent.
For the past several months, businesses across the country have grappled with the question of whether the pandemic and local “stay at home” or “shelter in place” orders aimed at curbing the spread of COVID-19 trigger force majeure clauses in their leases and other contracts. In one of the first cases to consider this question, the U.S. Bankruptcy Court for the Northern District of Illinois held in In re Hitz Restaurant Group that a restaurant tenant was entitled to a rent reduction under its force majeure clause due to Illinois Gov. J.B.
Whether or not the impact of the COVID-19 crisis on a party’s ability to perform its obligations will constitute a force majeure event enabling them to claim relief depends on the terms of the contract as applied to the precise circumstances. Where there is no force majeure clause, a party may in rare circumstances be able to invoke the doctrine of frustration.
The landlord argued that the force majeure clause did not apply at all for three primary reasons. The Bankruptcy Court rejected each of the landlord’s arguments.
At the time of this writing, it’s not exactly another day in paradise, over 103,000 Americans are no longer with us, there are an estimated 1,500,000 confirmed U.S. cases of the coronavirus, and I am also ballparking at 40,000,000+ unemployment claims filed at the time of this writing, because just two weeks ago it was at 36,500,000. Obviously, it’s not hard to see and hear more gloom and doom in the news about the plummeting economy in the U.S.
Preparation of financial statements and corporate income tax, recommencement of time periods, remote trials, gradual return to workplaces, insolvency proceedings and compliance with criminal law
Questions from a landlord's perspective
My Tenant has asked for a rent holiday. I want to help them out at this time - how can I facilitate this?
Most landlords and tenants are working well together to reach agreement in respect of rent, either moving rental payments to monthly rather than quarterly in advance, or deferring rental obligations for a specified period. It is obviously preferable, but not necessarily essential, to have such arrangements documented in writing, as follows: