Businesses are suspending or renegotiating contracts, says Sudhir Mishra of Trust Legal

BW Legal World: Mr. Mishra, thanks for this interview to BW Legal World. As the coronavirus situation has deeply affected businesses across the spectrum, what can law firms do to help businesses especially small and medium-sized businesses? Please also tell us how Trust Legal is advising its clients in the current situation.

Sudhir Mishra: My fellow lawyers in China  have informed me that the demand of legal  advisory and work in China has increased manifold in last two weeks alone, especially on contract management and re-negotiation of business interests after the COVID - 19 crisis. 

In India, the primary focus of Trust Legal is on Healthcare, Real Estate, Media & Broadcasting and Food & Beverages industries.

As a law firm, Trust Legal advises a number of healthcare clients across the country including super specialist brands and healthcare chains. The present crisis has affected the businesses in different manners and each situation is unique. 

In the midst of this crisis, some of our Clients which are engaged in the business of medical devices and equipment, are facing demands for their products from national and international players. Thus, Trust Legal and the clients are negotiating, vetting   and executing various agreements to meet such demands. 

Moreover, in the present situation, few of our clients have strategically decided to suspend of certain activities for the next few months, and such clients are in the process of terminating various vendor/consultancy agreements in respect of such services. Thus, in such cases, legal advice and action is required for termination of the contracts, suspension of the contracts and/or re-negotiation of the contracts. 

In addition, certain medium-sized and small-sized businesses, are exploring their available rights under various agreements to curtail expenses and expenditure. Thus, Trust Legal is advising such businesses on available options including negotiation on waiver of monthly rentals,   re-negotiation of vendor contracts/ consultancy contracts etc. 

BW Legal World: Could you please elaborate on what your clients or corporates are seeking your advice most on, in the last few days?

Sudhir Mishra: Primarily our clients in Healthcare sector, FMCG sector and  Food &   Beverages sector are seeking advice on whether they will fall within the purview of "essential services"/"essential commodities" as per the government guidelines issued on March 24, 2020 owing to their specialized goods and services, and if so, then what would be the safety measures to be adhered to, as per the guidelines issued by the government. The aspect of invocation of force majeure clauses and waiver of rental fees for the period during which their operations have completely collapsed owing to the complete lock-down of the country is also one of the most important issue where clients are seeking constant advice from Trust Legal. 

Few clients are also seeking to curtail expenses on the human resources front and are therefore negotiating or re-drawing employee contracts, consultancy contracts wherein they are attempting at deferring payments, requesting their employees to take voluntary cut in salaries, and in some extreme cases asking the employees to go for unpaid leave for few months.

So, in all these circumstances, a lawyer’s role becomes very critical as we have to ensure that all government directives are being adhered to while maintaining a balance between employee’s interest as well as our client’s wish list.

BW Legal World: So, what are the trends looking like, from legal perspective.

Sudhir Mishra: The present situation is unprecedented and honestly, a circumstance of this nature had not been foreseen by the businesses.  The present crisis and national lockdown is witnessing a debate over the terms “force majeure” and “frustration”.  Though “force majeure” clauses form a part of most agreements, however, the tendency for various businesses had been to view it only as a boiler plate clause, meaning, the clause was merely incorporated without much thought and deliberation on the causes that should constitute as “force majeure”. Since “force majeure” does not find mention in the Indian Contract Act, thus the parties have to relegate to the strict interpretation of the language of the clause as contained in the agreements. 

Thus, each “force majeure” clause is unique and has to be studied distinctly.  Since several force majeure clauses by way of its wording may not cover the present situation, lawyers are falling back on the provision and implications of “frustration” of  a contract as provided in the Indian Contract Act. 

Nonetheless, the present situation is a learning experience and shall undoubtedly affect the “force majeure” clauses in the future. 

BW Legal World: What is your forecast for businesses in the next 90 to 120 days?

Sudhir Mishra: As I truly believe that India will skip this stage III of  the corona crisis due to its unprecedented lockdown and social distancing, I trust that businesses will jump back sooner than later and whatever loss of business that we are projecting, may  in fact face  a shorter hit or limited impact in the entire financial year. In my understanding, the infrastructure sector, health sector, oil and gas sector, food & beverages sector and the tourism sector will not see a massive fall if  India manages to come out with limited losses. 

I also feel that India’s position in the world will be substantially highlighted and the respect for the country, its resources  and its infrastructure will be seen across the world.

I believe that with the international scale of this pandemic, foreign travels are likely to be substantially reduced for the next few months, which would result in a positive growth of  the domestic tourism industry. Moreover, for foreign travellers, India shall emerge as a preferred destination for travel over various countries that have been severely hit by the pandemic. 

The same is also being suggested by International Organisation like WHO and International Monetary Fund.

BW Legal World: Thanks for giving your useful inputs.

(Mr. Sudhir Mishra is the Founder and Managing Partner of Trust Legal. The firm has its offices in New Delhi, Noida, Ahmedabad and Kochi.)