The current unprecedented Covid-19 pandemic, coupled with the Movement Control Orders (MCO) imposed by the Malaysian government, have a sweeping influence across different industries, impacting big corporations and small enterprises alike. A major issue affecting various companies is performance of their contractual obligations pursuant to their written contracts.
It is opportune to consider the possibility of parties renegotiating their contracts to achieve a suitable and commercial way forward in maintaining commercial relationships. Here are a few key points to consider in the renegotiation of contracts: -
Renegotiation is a Commercial Practice - Renegotiation of contracts is a commercial practice, not a right provided under the law unless the contract itself stipulates otherwise. Therefore, whether re-negotiation will be commercially beneficial depends on the terms contained in the individual contracts and the situations of the parties on a case-by-case basis.
When Should Companies Consider Renegotiating Their Contracts:
Circumspection is Required in Renegotiating – A thorough examination of your contract is important to ensure that before entering into a renegotiation of its terms, you are aware of your rights and liabilities under the said contract. and executed to avoid any future disputes on the same. Communication with counter-parties to a contract should also be approached carefully and with tact, especially when the renegotiation of the contract is aimed at benefitting your existing position and to avoid any admission of liability. It is prudent to ensure that all amendments agreed to by parties should be in writing
Examples of the terms which should be incorporated or renegotiated: