Businesses would do well to budget for increased legal costs post Covid-19

Businesses would do well to budget for increased legal costs post Covid-19

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Many SME businesses used to see legal fees paid to law firms for reviewing contracts as unnecessary business expenses. A dollar saved on such unnecessary costs is a dollar more for profits. Then, there is also the view that paying for lawyers to draft contracts may not add much value since many contracts are based on existing templates which are readily available on the internet.

Then came the onslaught of the Covid-19 outbreak. Businesses were forced to shut down operations and supply chains were disrupted in April 2020 and May 2020. Imagine a hypothetical scenario in which Company X finds that the costs of procuring goods from an overseas supplier for redelivery to a buyer in Singapore has effectively more than tripled. However, the obligation to deliver to the end buyer remains. The end buyer demands delivery, refuses to pay more for his consignment and has threatened to commence proceedings for non-delivery. Company X seeks legal advice and is informed that the company could seek to rely on the force majeure clause or the doctrine of frustration. However, it is difficult to make out a strong case of frustration and there is no force majeure or similar clause in the 2-page ‘contract’ which was drafted by using templates and not vetted by lawyers. If Company X is unable to deliver the goods, it is likely required to pay a significant sum as damages for breach of contract. Alternatively, Company X can procure substitute goods from a local supplier and may incur some losses but at least the hefty costs of litigation may be avoided. Either way, it is really choosing between a rock and a hard place. If only, there is an applicable force majeure clause in Company X’s contract.

Does Company X’s predicament sound too familiar? Is your company experiencing a similar situation? It is still not too late to take measures to prevent history from repeating itself. It is hoped that the lessons learnt from the Covid-19 disruption will create a rethink on the mentality that legal costs are unnecessary and merely eat away at profits. At Silvester Legal LLC, we work with you to identify loopholes and put in safeguard measures to ensure that you can rest easy in the event of another similar crisis or in the event of a resurgence of the Covid-19 pandemic.

 

Services that we offer

We will review your existing contracts and advise on the steps that you may take to mitigate your risks. For future contracts, we are also able to represent you during pre-contractual negotiations and ensure that amongst other clauses protecting your rights, purposefully-drafted force majeure clauses and similar contractual provisions are in place to carve out an ‘emergency exit plan’ during contingencies and unexpected disruptions in the supply chain.

If you are unable to perform your contractual obligations and intend to apply for relief under the Covid-19 (Temporary Measures Act) 2020, be prepared that the other party may also dispute your eligibility for relief. In the converse scenario, you may also wish to challenge a notification for relief that is served on you by another party. We are able to assess and advise on the merits of your position and knowing how strong your case is would allow you to make an informed decision whether to make concessions or to apply for an Assessor’s Determination which carries the risk of an unfavourable but binding determination being made against you.

Apart from ad hoc services, we offer monthly retainer services that reduces your legal costs in the long run. Put simply, a retainer is an arrangement wherein you pay a fixed fee every month for us to offer specific legal services. Procuring legal representation on a monthly retainer is generally much more cost-effective as we do not charge strictly by the hour but instead charge for a pre-agreed scope of work. Learn more about our monthly retainer fees and scope of the retainer here.

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