3 Legal Issues Businesses Should Consider During the Coronavirus Pandemic
The coronavirus pandemic has not only wreaked havoc on the medical industry on a global scale, but it has changed business practices and has exposed some legal concerns. Below are the 5 top legal concerns to watch out for during the Coronavirus outbreak. Businesses will want to watch out for and prepare to deal with these concerns.
1. Contractual Breach
As a whole, businesses may have a difficult time performing the duties of their contracts. Unfortunately, the coronavirus pandemic does not excuse one from their contractual obligations. There are some exceptions, however, that may relieve a party from the obligation to perform a contract. Outlined below are three legal doctrines that govern a contract's enforceability. Additionally, you may refer to my blog post titled “Does COVID-19 trigger a contract’s force majeure clause?”.
As Plunket Cooney points out, there are three legal doctrines courts use to decide whether a contract is enforceable:
“(1) frustration of purpose,
(2) force majeure, and
(3) impossibility or impracticability of performance.”
Frustration of Purpose
Frustration of purpose occurs when “a later and unforeseen event impedes [party 1’s] purpose for entering into the contract, and [party 2] at the time of entering the contract, knew of [party 1’s] purpose.”
As organized by Plunket Cooney, for a frustration of purpose claim to prevail, “one must prove:
the contract must be in the midst of being performed;
the frustrated party's purpose in making the contract must have been known to both parties when the contract was made;
the purpose must have been basically frustrated by an event not reasonably foreseeable at the time the contract was made, not due to the fault of the frustrated party, and not based on a risk assumed by the frustrated party.”
However, it is not that simple. The frustration of purpose must be so severe that it falls much outside the risks that one has assumed when they made the contract, or circumstances have changed to where the performance of the contract wouldn’t make any sense.
Force majeure is another legal doctrine to which a party may seek relief of their contractual duties. A force majeure clause in a contract becomes activated when the circumstances renders the performance of their contractual duties impossible. You may refer to my blog post titled “Does COVID-19 trigger a contract’s force majeure clause?” for more information about force majeure clauses and how they work.
Performance Impossibility or Impracticality
Another doctrine that may excuse a party from its contractual duties is the doctrine of impossibility (also called the doctrine of impracticability). Plunket Cooney, notes that there are two types of impossibility. The first is original impossibility and the second, supervening impossibility.
Original impossibility occurs “when impossibility of performance existing when the contract was made, so that the contract was to do something that was impossible from the outset.” Supervening impossibility, on the other hand, is formed after the contract is made.
2. Privacy & Cybersecurity
There has been an increase in privacy and cybersecurity issues since the rise of the coronavirus outbreak. This can be illustrated by the rise of Zoom; a video meeting service that grew in popularity and was the platform of choice as schools and workplaces were forced to go remote. Zoom’s exponential growth exposed some privacy risks. Namely, the privacy break in came to be known as “zoombombing,” where a person crashes a Zoom meeting and cause disruption while showing either hateful or overtly sexual content.
Additionally, there are cybercriminals targeting the Center for Disease Control (CDC) to collect financial account information. There has also been an increase in phishing emails and ‘bait documents’ which are used to trick persons into downloading malware onto their personal computers. Due to the increase in privacy concerns and cyber-attacks, it is recommended that businesses take preventative and mitigative measures to protect themselves.
National Law Review provides some steps businesses can take to protect against threats. You can find the full detailed list here. A simplified version of the same list is listed below. Although brief, much of the wording remains unchanged.
Conduct refresher trainings “for employees on how to detect phishing attacks other forms of social engineering and the organization’s procedures for responding to and reporting them.”
“Sensitive information, such as personnel records and financial information, stored on or sent to or from remote devices should be subject to heightened safeguards, such as the encryption of data in transit and at rest on the device and on any removable media used by the device.”
Business “should ensure that the protocols around incident response are clear, that incidents continue to be appropriately flagged and escalated, and that the incident response team can communicate effectively and efficiently.”
Businesses should “review the policies they have to determine whether they adequately address security requirements for remotely accessing company systems.” If these policies do not currently exist in your organization, then it is highly encouraged to communicate “to employees some basic guidelines for remotely accessing company systems and using personal devices for company business, even if not in the form of a formal policy.”
Ensure “that your organization has installed all relevant security patches. . . that address is known security vulnerabilities and failure to install patches allow cybercriminals to exploit such vulnerabilities to gain access to company systems.”
3. International Trade
According to the World Trade Organization (WTO), global trade is expected to fall by between 13% and 32% in 2020 due to the coronavirus pandemic. The WTO compares the economic destruction of the COVID-19 outbreak to the economic downturn of 2008/09. What is different, however, is the effect on “labor supply, transport, and travel” caused by governmental laws meant to slow down the spread of COVID-19. Global economic structures “have been shut down, including hotels, restaurants, non-essential retail trade, tourism, and significant shares of manufacturing.”
The WTO provides two scenarios to predict future trade performance post-coronavirus:
The WTO labels the first chart as an ‘optimistic scenario,’ which is represented “with a sharp drop in trade followed by a recovery starting in the second half of 2020.” The second chart shows a ‘pessimistic scenario,’ which represents a similar drop in trade as the first chart, but the recovery is much longer and somewhat incomplete.