Model Standstill Agreement for Business in Response to COVID-19 Crisis, 0520 RIBJ, RIBJ, 68 RI Bar J., Special COVID-19 Issue, Pg. 18

AuthorPatrick A. Guida, Esq. Duffy & Sweeney, Ltd.
PositionVol. 68 Special COVID-19 Issue Pg. 18

Model Standstill Agreement for Business in Response to COVID-19 Crisis

Vol. 68 Special COVID-19 Issue Pg. 18

Rhode Island Bar Journal

May, 2020

Patrick A. Guida, Esq. Duffy & Sweeney, Ltd.

Many commercial and other contractual business relationships are now, or will soon be, in breach in consequence of the COVID-19 pandemic. Rhode Island businesses and their attorneys should welcome the introduction and availability of a simple, bilateral standstill agreement crafted to provide a temporary, contractual bridge over the raging economic chaos instigated by the crisis. A model for such an agreement, and a short introduction thereto, has been drafted by Norman N. Powell and Jonathan C. Lipson and appears in the April 2020 issue of Business Law Today, published on Friday, April 17, by the Business Law Section of the American Bar Association. Yo u can access the introductory article, styled as “Don’t Just Do Something–Stand There! A Modest Proposal for a Model Standstill/Tolling Agreement” at: Corporations, LLCs & Partnerships (https:// businesslawtoday.org/practice-area/corporations-llcs-partnerships/), with the Agreement itself labeled “MODEL STANDSTILL / TOLLING AGREEMENT” in both annotated version at: (https:// businesslawtoday.org/wp-content/uploads/2020/ 04/annotated-version.html) and unannotated version at: (https://businesslawtoday.org/wp-content/ uploads/2020/04/without-annotations.html) (the “Agreement”). Review of the annotated version is recommended.

I was afforded a pre-publication opportunity to review and comment on the introductory article and the Agreement. It is worthy of our serious attention, subject to certain considerations mentioned below for Rhode Island based transactions. Great attributes of the Agreement are that it can temporarily freeze legal relationships in place, forestall the exercise of irrevocably damaging legal remedies, and at the same time allow for the accommodation of one or another portion of the existing agreement to remain operable and subject to continuing performance.

Indeed, while recently enacted legislation in response to the COVID-19 crisis, including the CARES Act which established the two (2) main lending programs for small and mid-sized businesses–the Paycheck Protection Program (“PPP”) and the Main Street Lending Program (“MSLP”), may provide a certain level of financial support for a period of time necessary to allow for the implementation of new business and legal...

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