Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Sign up for our Corporate newsletter
You must correct or enter the following before you can sign up:
Thank You!
Law360 (April 20, 2020, 11:02 PM EDT) -- The American Bar Association's business law section on Monday announced it has published a model standstill agreement intended to help preserve business relationships while the economy stabilizes from the coronavirus pandemic.
Developed by Temple University's Beasley School of Law professor Jonathan C. Lipson and Young Conaway Stargatt & Taylor LLP partner Norman M. Powell, the template lays out a way to place a legal "freeze" on a commercial relationship in light of the COVID-19 crisis.
Under the template, a creditor would agree not to take legal action against the debtor for a chosen period of time. The debtor would agree not to engage in any transactions "not in the ordinary course of business," such as transferring property or selling off a substantial amount of assets, and would agree not to make any sudden changes in ownership or control of its business.
The sample contract can then be adjusted to incorporate payments or services, if any, that may continue during the chosen standstill period, with the terms to be negotiated by the respective parties.
Standstill agreements aren't new, but this template has some features aimed at COVID-19, Lipson told Law360 on Monday.
One example is a provision stating that the parties agree to support one another's efforts to obtain new financing, allowing a business to point to the standstill arrangement as it pursues loans or other relief in the interim.
"We just think most folks are better off if they are not running to court [or] running away from each other, and trying to engage each other in some rational way," Lipson said. "The idea is that people are probably better off if they act proactively to address either a current or impending breach by engaging [in] some sort of conversation about how they can restructure the relationship."
Entering into these kinds of alternative arrangements now could also help stem the tide of coronavirus litigation and breach of contract claims down the line, Lipson said.
And while all parties are encouraged to consult with attorneys in the process, the template was also designed to be easy to navigate — particularly for smaller businesses that may not have the same resources as bigger ones, he said.
"Something of this sort is probably better than nothing for many, many people," Lipson said.
--Editing by Alanna Weissman.
For a reprint of this article, please contact reprints@law360.com.
