Does your business need to scale back in 2016? Don't make any moves without considering these issues.

• Author: Saade, Renea I.
• Position: Legal Speak

It comes as no surprise that Alaska businesses are looking for ways to scale back in 2016 given our state's precarious economic climate. Many businesses are reducing their charitable contributions, abandoning expansion plans, forgoing contract renewals or only renewing on a month-to-month basis, postponing hiring, considering layoffs, converting certain regular positions to temporary or contracting work out, and evaluating other options to reduce their business expenses and risk should our local economy take a more serious turn for the worse. Before your business makes any significant moves, however, you should consider the following issues to avoid creating more harm than good.

What Are Your Contractual Obligations and Options?

If you are considering cancelling a contract early or reducing the level of business between you and the other party, or if you want to request a renewal that is shorter than the last contract term, start by reading your contract, statement of work, purchase order, or other policies or terms that govern the relationship. Is there language that allows for the relationship to be modified by one side? Is there agreement by the parties? Does the document allow for early termination? Is there an early termination penalty that the other side could demand? Is there a section that provides for renewal options? If you are able to terminate or renew, what are the notice requirements? Who must the notice be sent to? How much advance notice must be given? These questions are particularly critical if the document is an employment contract, as the consequences for not complying with it can be significant.

What Are Your Rights?

Irrespective of whether you have a contract or other written document that sets out the terms of your relationship, you have legal rights. And, even if your contract does not provide you with the right to cancel or modify it, you may still have a legal right to do so if the other party to the contract has not fulfilled its end of the bargain. For example, if the other side did not provide the materials or services as promised, the contract may already be breached, thereby giving you the right to terminate or giving you leverage to re-negotiate the terms in a way that is more feasible. Similarly, the other side may have already violated the covenant of good faith and fair dealing that is implied in every contractual relationship, and, as a result, you are in more control of what happens next.

Consider Risks...