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COVID-19 Resource Center

COVID-19 Question of the Day

Q

I am a party to a contract for the sale of goods and the other party to the contract recently filed for bankruptcy. Can I terminate the contract assuming the other party will no longer perform?

A

Many contracts include clauses stating that a party can terminate the contract when the other party files for bankruptcy, and so you may think that the answer is a clear “yes.” However, when a company files for bankruptcy, the bankruptcy laws provide that an “automatic stay” immediately takes effect. The automatic stay is very broad and it generally prohibits unilateral termination of contracts even if the applicable contract specifically authorizes termination upon a bankruptcy filing. So the answer to your question is generally “no,” you cannot unilaterally terminate a contract based on the other party filing for bankruptcy. If you do terminate and violate the automatic stay, you could be subject to sanctions by the Bankruptcy Court.
 
Although unilateral termination of the contract is generally prohibited, it may be possible to obtain Bankruptcy Court approval to obtain “relief from the automatic stay” to allow you to terminate the contract. Whether you can obtain relief from the automatic stay by the Bankruptcy Court will depend upon the facts and circumstances of your case and the statutory requirements. Please contact Jon Lauderbach or Gordon Toering for more information.   

Click here for previous questions.

The information provided above in these Q&As is intended for general information purposes only, is not intended to provide legal advice on any specific facts and circumstances, and does not give rise to an attorney-client relationship. The information is current as of the time the question is posted and subject to change. If you have questions regarding the application of this information to you or your business, contact your Warner attorney directly.
 

Warner is helping our clients navigate the response to the COVID-19 virus and the various state and federal changes in response to the virus. Warner assembled an interdisciplinary team of attorneys that are dedicated to remaining on top of the many changes prompted by this novel coronavirus.  We will continue to provide updates and developments to our clients as we all face the challenges and changes from COVID-19.
 
Warner has prepared the following COVID-19 resource center to make it easier for our clients to access important updates in a single location. Here you’ll find links to our eAlerts providing information and guidance on a range of issues such as labor, contracts, insurance, intellectual property and litigation to name a few. You’ll also find our summary of Governor Whitmer’s Executive Order, as well as a letter from Warner’s Managing Partner outlining the measures the firm has taken to continue serving clients while complying with the latest government and health guidelines.
 
To have future updates delivered directly to your inbox, please subscribe by sending your email address to covid@wnj.com.
 

Additional Warner COVID-19 Information and Guidance

COVID-19 Construction Issues

The COVID-19 pandemic and accompanying government orders restraining business operations have led to unprecedented disruption in the construction industry. In Michigan, although some critical infrastructure and health care-related projects continued during the stay-at-home order, most projects were idled until residential and commercial construction was permitted to resume on May 7. This disruption, along with accompanying disruptions in materials manufacturing and access to capital, will undoubtedly lead to disputes among owners, contractors and subcontractors regarding how to handle the resulting delays and cost overruns.

Lease Defaults and Litigation are Expected to Rise in the Wake of COVID-19

The widespread shutdowns caused by the COVID-19 pandemic have hit the commercial real estate sector particularly hard. Nationwide, billions of dollars in retail rents and other charges went unpaid for the month of April, as revenue streams dried up due to COVID-19 lockdowns. With Michigan’s lockdown now extending through May 15, 2020, many businesses are grappling with how to address rent payments that are due on May 1st.

COVID-19 Tips for Video Parenting Time

Whether you live out of state, are self-quarantining or have agreed to wait until after the emergency orders expire to exercise parenting time, staying connected with your child during this difficult time is important. 

Stay Home Stay Safe Order: Impact on Child Custody and Parenting Time Orders and Agreements

On March 23, 2020, Governor Whitmer issued Executive Order 2020-21 (COVID-19) which requires all non-essential workers as defined in the Order to Stay Home Stay Safe for the next three weeks at least, starting at midnight on March 23, 2020. The Order provides a list of exceptions to the rules including addressing compliance with custody orders.

Warner Helps You Navigate "Business As Anything But Usual"

As we begin to prepare for the safe return to our offices, please know our Warner attorneys continue to work from home without missing a beat – and will do so throughout the month of May.

Warner in the News

6-1-20 Real Estate: Relaxation of real estate evaluation, appraisal requirements
In light of COVID-19, federal agencies have issued guidance that provides flexibility for property evaluations and appraisals. Warner attorneys Rachel Foster and Alexandra Chitwood write a column in the Grand Rapids Business Journal outlining guidance for buyers, sellers and lenders.

5-22-20 Litigation: Stock drop litigation is coming – are you ready?
Warner partner and litigator Brian Masternak provided an overview of stock drop litigation for The National Law Journal in a bylined article. As our nation continues to wrestle with COVID-19, Masternak tells readers that it’s not a question of “if” but of “when” – when stock prices drop precipitously, it’s inevitable that publicly traded companies will see claims of securities fraud over representations or disclosures alleged to be materially misleading. You can read the article here.

5-11-20 Litigation: Brian Masternak Warns of Stock Drop Litigation During Times of Crisis Grand Rapids Business Journal
Warner partner Brian Masternak provides steps to prepare for stock drop litigation in the wake of COVID-19. Plaintiff’s attorneys file these lawsuits in the wake of the 2008 financial crisis and the outbreaks of Ebola and SARS. While the precipitating events may change, the resulting cases from the securities class action bar follow a predictable pattern. Read the Grand Rapids Business Journal article here.

5-11-20 Trusts and Estates: Mark Harder on Estate, Tax Planning Ideas for a COVID-19 Economy Holland Sentinal
Warner Norcross + Judd LLP partner and chair of the firm's Private Client and Family Office Practice Group, Mark Harder writes about the depressed values in the markets, low interest rates and historically high federal estate, gift and generation-skipping transfer tax exemptions that have created some excellent opportunities for you to make impactful gifts to your family and generate potentially significant tax savings. Following are eight wealth planning tools you may want to consider. Read the full article in the Holland Sentinel here.

5-4-20 Litigation: Beware of Coronavirus Scams and Phishing Attacks Midland Daily News
Warner partners Norbert Kugele, Madelaine Lane and Brian Wassom wrote an article that was published in the Midland Daily News called "Beware of coronavirus scams and phishing attacks." During the COVID-19 crisis, criminals continue to ply their trade, exploiting the crisis for their gain. While employees work from remote locations, it is important for businesses to continue educating their teams about cyberattacks to prevent information systems from being compromised. Read the full article here.

5-4-20 Real Estate: Tom Amon Writes About Lease Defaults and Litigation are Expected to Rise in the Wake of COVID‑19 for the Grand Rapids Business Journal
Warner partner Thomas Amon laid out a roadmap for landlords and tenants to prepare for potential litigation over lease defaults in light of COVID‑19. In this blog for the Grand Rapids Business Journal, he stressed the importance of protecting your position – and your communications.  

4-27-20 Cybersecurity: DBusiness Features Warner’s Article on Data Privacy and Cybersecurity Concerns Amid COVID‑19
On April 27, 2020, DBusiness Tech and Mobility News included an article titled, “Data Privacy and Cybersecurity Concerns Amid COVID-19,” written by Warner Norcross + Judd LLP attorneys Kelly R. Hollingsworth and Jeffrey S. Segal. As the COVID‑19 pandemic continues, significant issues related to data privacy and cybersecurity are on the rise, largely triggered by two key factors: 1) more workforce members working remotely; and 2) organizations processing more employee health information. Below, we discuss some of the issues organizations are facing as a result of these and other factors and offer tips for mitigating the risks. The complete DBusiness article is available here.

4-10-20 Financial Services: GRBJ Discusses CARES Act with Matthew Johnson
Warner Partner Matthew D. Johnson discusses small business resources available in the CARES Act stimulus package in an article titled, “CARES Act guidance for small businesses,” in this week’s Grand Rapids Business Journal. Johnson describes the framework of the $350 billion fund, including details on eligibility for loan forgiveness and special programs under the Entrepreneurial Development Program. Read the full article here.
 
4-10-20 Technology and Intellectual Property: GRBJ Features Warner’s IP Report
Although COVID-19 has severely disrupted our routines, a professional “pause,” if managed strategically, can bolster your business arsenal. Warner Partners Mary C. Bonnema and Brian D. Wassom co-authored “The IP power pause: finding opportunity amid the chaos” which ran in today’s Grand Rapids Business Journal. Read the full article here.

Click here to subscribe to Warner's future COVID-19 eAlerts. 

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