Matthew Kenney

Small Business | Workplace Law

  • Blog
  • About
  • Contact
  • Small Business Law
  • Community Service
  • Non-Profit Law

Coronavirus and Contracts: Must You Perform?

Posted on: 03.19.20 | by Matthew Kenney

The COVID-19 pandemic has negatively affected the global supply chain. Orders are going unfilled, which means contracts terms are not being met. Does it constitute a breach-of-contract when a supplier cannot fulfill its obligations?

The answer is: It depends.

Having a signed contract is one thing. Enforcing it is another. Under Florida law, there are instances where courts will excuse a party from contract performance. Two such instances: Where it is impossible to perform; and when it is impractical to perform.

However, courts will generally not excuse a party from performing when a disruptive event is anticipated at the time of contract formation. Stated differently, a court might require a party to perform if a risk — including a pandemic and resulting national emergency — was anticipated by the parties when they entered the contract.

The question before many business owners and their legal counsel: Is COVID-19 a risk that was reasonably anticipated by the parties?

Many written contracts will have a Force Majeure (meaning “Superior Force” ) clause, which excuses a party from performance if there is an unforeseen and uncontrollable event the parties could not have contemplated during the formation of their contract. There is no doubt COVID-19’s impact on one’s business is uncontrollable. The question in a breach-of-contract lawsuit, however, might be: Was it unforeseeable?

The phrase Force Majeure is generally used in contracts as synonymous with an “Act of God”. Contract performance prevented by hurricanes, floods and tornadoes would fall easily into this category. But what of COVID-19? Was this terrible event really unforeseeable?

Although COVID-19 feels like a sucker punch to our economy, futurists have warned of the risks of potential epidemics and pandemics (just like COVID-19) for years. Bill Gates gave a TED Talk on the subject in 2015, for example. Since 2000, the world has seen outbreaks of SARS, Swine Flu, Avian Flu, MERS etc. A reasonable person could argue parties should have addressed future epidemics and pandemics in their contract terms, given the notice we’ve been given by experts about our susceptibility to such events.

The point: Do not assume the effects of COVID-19 will absolve your company from contractual liability, even if performance is impossible or impracticable. A judge might ask: “If other companies and entrepreneurs specifically addressed the issues of national emergency, epidemic, or pandemic in their contracts….why didn’t you?”

Florida courts will likely evaluate your Force Majeure clause based on its clear, unambiguous language. It’s possible Florida courts will view non-performance related to COVID-19 as unforeseeable and uncontrollable events, freeing a party from performance. It is equally possible they will not. Therefore, the best approach going forward is to ensure your contract languages addresses epidemics and pandemics in clear, unambiguous terms.

Do Yourself a Favor: Re-Define Failure

Posted on: 12.06.16 | by Matthew Kenney

nolan_ryan_in_atlanta_croppedBaseball fans likely know Nolan Ryan, and many can correctly identify him as the all-time leader in strike-outs (having struck-out 5,714 batters). But how many people know he is also the all-time leader in walks? Those who like baseball stats probably also know he threw a record 7 no-hitters. Yet, Mr. Ryan also had a career winning percentage of only 52%.

Nolan Ryan lost nearly as many games as he won. Do you think he considered himself a loser after he lost a game? It is doubtful. What do you think Elgin Baylor, Patrick Ewing, Charles Barkley, Ted Williams, Barry Sanders, Fran Tarkenton and Jim Kelly (all Hall-of-Fame inductees in their sports) have in common? They never won a professional championship. Yet, they all had lucrative careers. Are these men failures?

As professionals, we should never confuse what we do…with who we are. Nobody likes losing – be it a game or a prospective customer – but a game or sales presentation is only an event. Failing to achieve a goal does not make a person a failure. Professionals should learn from the experience, practice to sharpen their skills, and try again. There are many variables that affect the outcome of a goal. Unfortunately, personalizing set-backs is common in the workplace. We will not win today’s game if we are thinking about yesterday’s loss. So why do we spend time thinking about yesterday’s losses?

In Practice: Redefining Success and Failure

Do you want to be successful 100% of the time in business? It is possible, just redefine success and failure as follows:

  • Success = Giving the best possible effort 100% of the time, and maintaining an uncompromising commitment to professionalism.
  • Failure = Any effort that is less than our absolute best, and less than professional.

We cannot control what goes though a customer’s or colleague’s mind. But we can control what we put into their minds mind. An interaction does not have to result in a sale or new project to be a success. An interaction is a success when another person feels he/she has been treated with respect and dignity.

When marketing, not every prospective customer who receives excellent service will become a client. There are competitive, economic, sociological and psychological forces far beyond any sales professional’s control. But a successful customer service experience is 100% within each professional’s control. If we focus on service-quality success in every customer interaction the result will be increased sales. The key: Don’t define success as a profit. Define success as an exceptional customer service experience. Do this and profits will flow like a river.

(Copyright 2016, Kenney College. All Rights Reserved).

Non-Profit & For-Profit Education

Posted on: 08.19.16 | by Matthew Kenney

Professors teach students not to be judgmental; to avoid stereotyping; and to appreciate innovation and diversity. Yet, readers of Higher Education publications will find daily posts and articles that — either expressly or tacitly — attack proponents of a different economic philosophy. We see this most starkly when discussing the merits of for-profit and non-profit education.

Until the national income tax was established in 1913 there was no such thing as a “non-profit college” in the United States. While some states exempted private colleges from property taxes prior to 1914, others did not. The 501(c)3 concept we take as a given today is just over a century old, and increased in prominence primarily in the last half of the 20th Century.  For context: The origins of academia trace to Ancient Greece, and universities have been established for over 900 years.

The view, held by many but not all industry professionals, that profit and education are mutually exclusive is relatively new. To the contrary, consider the Sophists of Ancient Greece who traveled the countryside selling their knowledge to those willing to pay. Sophists invested in knowledge; charged for sharing it; and their students would then earn wealth (or retain inherited wealth) based on that knowledge. Those students became known as “sophisticated”.

More recently, consider the growth of Harvard University. Prior to the Civil War, Harvard was a long-established but — according to one prominent historian — was “a sleepy local school”. Significant growth and preeminence began in 1869 when its new President, Charles W. Eliot, emphasized the relationship between economic development and education. He monetized research and replaced trustees who were largely clergy and lawyers with businessmen (Hall, P.D., 2004).

There has always been a marketing component to academia. Think about: Can you name an industry that is more brand conscious than academia? Branding and positioning are major aspects of the industry, and there is nothing inherently wrong with that. But branding and positioning have to be done correctly. Otherwise, the efforts look like arrogance, pettiness and mean-spirited competition.

Some leaders and managers of for-profit colleges have made bad decisions in recent years, and created cultures misaligned with the history and mission of academia. Some marketing tactics have been unethical and unconscionable. Reasonable people understand this. But for-profit educators have also provided college access to traditionally ignored markets. Undoubtedly, for-profit educators have also played a positive role in the evolution of education technology (especially online courses).

Non-profit colleges have played profoundly positive role in society. College is a right of passage for millions. But what about the economic exploitation of adjunct professors to cut costs? What about a convoluted tiered pricing system that leaves some students paying an inflated tuition price, while other students pay $0. A non-profit college president once told me how he “loves big classes”. Yet, the evidence is clear that “small classes” enhance student learning outcomes. What about professors and leaders who refuse to accept scientific evidence that online instruction is, when facilitated correctly, as effective as on-site instruction?

The point: Higher Education is a unique industry with complex challenges. Educators should focus on meeting the needs of students…not casting aspersions. There are a lot of great for-profit colleges, and some that probably shouldn’t be in the market. There a lot of great non-profit colleges, and some that are woefully inefficient and mismanaged. As an industry, academia need to focus on the needs students and their families. The question shouldn’t be “what’s the best college?”, rather “what’s the best college for each student?”

Reference:

  • Hall, P.D. (2004). Historical Perspectives on Nonprofit Organizations in the United States. In Robert Herman (ed.), The Jossey-Bass Handbook of Nonprofit Management and Leadership — Second Edition (Jossey-Bass Publishers).

Social Media

Linkedin

© Copyright 2019 Matthew G. Kenney
All Rights Reserved

Policies and Legal Statements

Like to See a 38% Increase in Employee Productivity? Let Us Show You How.
Our Gift to You: Five Entrepreneurship Insights. Sign-Up Today to Receive Your Valuable Gift.
______________________
YOUR NAME:
YOUR EMAIL: