Legal analysis: Agree to pre-negotiate

Q. What concepts should parties consider when entering into contract modifications due to COVID-19?

A. If not already, in the coming weeks, parties will be approached by fellow contracting parties financially impacted by the COVID-19 virus.  Whether it's a landlord/tenant issue (e.g. extensions or default in rent payments), a lender/borrower issue (e.g. extensions or default in mortgage payments or required maintenance) or a business contract issue (e.g. lack of supply or failure to perform as required), parties will be requesting concessions, modifications, forbearances, and/or amendments to an existing agreement. If requested, a pre-negotiation agreement should be agreed upon. Pre-negotiation agreements are important as they provide protection. This protection prevents the fellow party from claiming a definitive agreement was reached as a result of non-binding negotiations when in fact it was not. Below are a few concepts to keep in mind when setting initial terms of a negotiation:

• Any resolution will not be binding on either party unless reduced to writing.
• No agreement should be based on oral communications or promises.
• An agreement defining the scope and content of negotiations should be in place before negotiations begin and include that the parties' discussions and related communications will not be discoverable or admissible for any purpose in any litigation or dispute.
• Negotiations should not be deemed to constitute a waiver, modification, forbearance, or release with respect to any party's rights or remedies of any breach or default by any party.   

Another important aspect of utilizing these agreements is that it requires parties to reveal whether the intent to negotiate is sincere and in good faith. A party unwilling to sign may indicate bad intentions and an unwillingness to compromise. In summary, a pre-negotiation agreement can be an invaluable tool when parties seek to discuss modifications to agreements.

Matthew Fischer is partner and health law attorney at Zumpano Patricios. Reach him at 305.444.5565 or mfischer@zplaw.com.