Tel: 804.864.1100

Tel: 804.864.1100

Tag Archive: business law

COVID-19 Impacts and a Potential Avenue for Contract Relief

pen on a contract documentAs the impacts of the COVID-19 virus spread and more businesses begin slowing or ceasing operations, some by government order, others voluntarily, many businesses are left wondering whether their contracts contain any avenue to excuse their non-performance during the emergency. Most turn immediately to the “force majeure” provisions, hoping to find relief. We have received numerous inquiries from our clients over the past days regarding force majeure clauses. The force majeure term generally lives among the boilerplate terms of a contract, and may not have been heavily reviewed or discussed (if at all) by the parties during contract negotiation. Accordingly, most force majeure provisions take a generalized catch-all approach, which could potentially benefit such an unusual situation as the COVID-19 pandemic.

From a general standpoint, the concept of force majeure is intended to excuse the performance of one or both parties to a contract when that performance is prevented or delayed by some event outside of the control of the performing party. The basic idea is that if a party cannot avoid, prevent, or overcome the occurrence of an event or circumstance that was not foreseen or foreseeable at the time of contracting, the affected party should be excused from any delay that is caused or, in some cases, the party may be excused from performing altogether. In practice, however, the exercise becomes more complicated. Force majeure provisions, like all other provisions in a contract, are subject to negotiation, and while the basic idea remains as described above, the application of this idea in each contract can vary widely. For instance, the term may only protect one party, it may have strict notice requirements, or it may be limited to a specific set of enumerated circumstances. The devil is truly in the details.

Unfortunately, the inquiry does not stop there. Assuming that the force majeure provision in your contract applies to your performance and encapsulates the effects of the COVID-19 virus, the critical question remaining is whether your performance is actually prevented by this emergency. Some cases may be clearer, such as when your business is ordered by a local, state or federal agency to cease operations. However, many businesses have not yet received such an order, meaning their cases for force majeure relief are murky.

In either case, the two key factors to consider are (1) what type of performance is required and (2) is the direct cause of non-performance outside of the party’s control? The answers to these questions are, unsurprisingly, dependent on the particular circumstances of each case. Some businesses may be directly prevented from performing under one or more contracts. Many businesses, however, may be left in a tough position where performance is possible, but is neither advisable nor profitable. While there may be other avenues for relief in certain circumstances, the best course of action in this situation may be to open a dialogue with your counterparty with the goal of clarifying (and properly documenting) that that anticipated impacts of the COVID-19 emergency will be treated as force majeure impacts.

As mentioned above, the impact, and potential avenues for contractual relief, arising from the COVID-19 emergency will depend greatly on the particular facts of each situation and, as is generally the case, there is no one-size-fits-all solution. In order to discuss the impacts of the COVID-19 emergency or the particular circumstances of your company’s situation, please contact one of the corporate and transactional attorneys at GreeneHurlocker.

GRACRE Market Review

The Greater Richmond Association for Commercial Real Estate will hold its February Market Review tomorrow, and my partner Jared Burden and I will be there at the Westin Hotel on West Broad in the Reynolds Crossing development tomorrow afternoon starting at 3:30 p.m..

These annual market reviews bring together brokers, agents, commercial landlords and developers to discuss market conditions, possible opportunities and new ventures. If you’re attending, be sure to find us and say hello. We’d like to tell you more about our commercial real estate and mergers and acquisitions practices across Virginia and beyond. If we miss you, just contact me or any of our Virginia real estate lawyers.

Ideas Are Just That: Part 3

We’ve been sharing a series of blog posts and videos here and here about how an idea is just that: an idea, and how there are some basic, critical things a high-potential start-up technology company founder must do in order to make any idea worth having and building upon. As I said in my first post, the fact is, most ideas suck. So a founder needs to be sure this idea is worth making it the most important thing in her life for the next months or years.

My third suggestion for the immediate post-idea step is: Focus obsessively on creating a minimally viable product.

Don’t get caught up in the romance of the wonderfulness or inevitability of your idea, the greatness of your team, or the exuberant free feeling of having decided to jump in with both feet. The fact is, you haven’t yet accomplished the whole reason for doing this in the first place, which is selling something to people who want to buy what you have to sell. The excitement is going to wear off and then it’ll be time to get to work. If you don’t get to work immediately, you probably will have lost your opportunity.

It is all about speed.

Too many startups begin with an idea for a product that they think people want. When it isn’t resonating with customers, it is often because the founders never spoke to prospective customers and determined whether or not the product was interesting. When customers ultimately communicate, through their indifference, that they don’t care about the product, the startup fails.
The truly most important question you need to start asking yourself is the following. It’s the first thing you should ask yourself even before you swing your legs off the edge if the bed to get up on the first morning after to you come up with your great idea.

“Should this product be built?”

And then, soon thereafter, maybe before you brush your teeth, you need to ask “Can we build a sustainable business around your product?’
At this point it’s really only about two things: a first product that you know the world needs, and a plan for how first product can actually get customers. The team needs to be focused brutally on these things. Let the customers be your source of accountability.

The new company should be focused on quickly developing a minimally viable product and then learning as much as possible about its weaknesses and opportunities for improvement. Iteration upon iterations, pulling your hair out from anxiety that you’ll never get it right, near-all-nighters and lost weekends — all of that fun stuff. The point is to do all of this on the front end, quickly, and always being in dialogue with the customer, not stuck in an echo chamber of a founder team that may be overly enamored with the original concept.

When a founder focuses on figuring out the right thing to build—the thing customers want and will pay for—she need not spend months developing a prototype or waiting for a beta launch to change the company’s direction. Instead, she can adapt her plan incrementally, inch by inch, minute by minute, moving fast, boxing out the competition.

A couple of years ago I spent three days in the James Madison University’s Icehouse facility with about 24 entrepreneurs who had agreed to lock themselves in and spend that whole weekend developing companies based on pitches that they made on the first night. These people , for the most part, had never met each other. Groups coalesced around about eight ideas big and small. Through the weekend there was a compressed process of honing the original idea and creating a business plan and readying the product or service for the launch. I remember several of the teams were stumped by this question: Will customers want this? Only one of the groups spent the first night doing customer demand research – one group had thought to do this out of eight. That may be somewhat reflective about what real companies do when they go out into the real world. I hope not.

The founding team members need to relish being sponges for crucial information gleaned from the only people that matter: potential customers. This is never more true than at inception and in the earliest weeks and months.

Watch for our next post on “Ideas are just that.” Meanwhile, if you have any questions about startup steps or business law, just reach out to me or any of our Virginia business lawyers.

Wow! Andy Brownstein Has Joined as A Partner!

Andy Brownstein, business lawyerAndy Brownstein joined us on January 1 as partner in the firm and focuses his law practice on business law, corporate finance, mergers and acquisitions, real estate and investment banking. He’s working in our Richmond office.

Andy counsels business clients and entrepreneurs in buy and sell-side mergers and acquisitions, strategic financing and capital investments, joint ventures, credit facilities, commercial real estate investments and contract matters.

“I’ve known Brian for many years, and I’ve watched as he and Eric Hurlocker developed a niche practice in the energy and regulatory arena into a strong multi-disciplinary firm with an intriguing and entrepreneurial client base, something that I’ve been interested in personally and professionally for most of my career,” Andy says.

He was a founder of and served as General Counsel of Global Realty Services Group for a decade, while also serving as its Chief Financial Officer (2009-2016) and President of its affiliated title company (2013-2017). Prior to GRSG, he was Senior Vice President-International Services for LandAmerica Financial Group after serving as SVP-Corporate Development. After law school, he served on the corporate finance team at McGuireWoods. Other career positions were with investment banking and private equity investment firms in both Richmond and New York.

Andy earned his J.D. and B.A. at the University of Virginia. At law school, he was the recipient of the S. Phillip Heiner Memorial Scholarship and was a William H. Echols Scholar in his undergraduate years.

Help us welcome Andy warmly. You can reach him at ABrownstein@greeneHurlocker.com or (804) 864-1100. If you want to know more about our business lawyers, just ask.

Client Conversations

Just prior to the holidays, we stopped by to see Randy Seitz, CEO of our long-term Harrisonburg client Blueline, to check in and get his opinion on what is important to his company in working with their law firm. This short video includes the things we talked about. Call or email me if you want more details.

Ideas are Just That: Part 1

That moment you realize you have an idea worth a business is a great moment. Sometimes it’s an epiphany on the road to Damascus. Sometimes it’s a slow dawning after a grind lasting several years. But however it happens, it’s time to sit back and go “huh.” It’s an achievement.

Most large corporations interested in continuing to exist generate ideas all of the time, as a matter of course. These ideas, generated by scientists or creatives, are noted, catalogued and vetted. With the promising ones, perhaps the inventor/employee fills out a patent disclosure form and a provisions patent application is filed.

But the rest of the ideas? They are just embodiments of the old adage that you have to kiss a lot of frogs before you find your prince or princess. You never get to the good ones unless you generate a lot of bad ones.

The fact is, most ideas suck.

I’m not writing to talk about bad ideas, though. I want to write about what high-potential start-up technology companies should first do with their good ideas.

Joseph Lassiter of Harvard Business School says a high-potential technology startup is one that plans to hit the $50 million per year mark in new product/service sales within 5 years.”
A new one-off auto battery retail store down the road, no matter how impressive the owners are, is not a high potential technology startup. But, the company that holes up in a garage in an industrial park developing an electricity storage product that is based on an idea that came out of a major university technology transfer office and could disrupt the solar energy marketplace probably is one. It almost certainly wants to sell its products to every big or small solar energy producer anywhere in the world and will do whatever it takes to get there.

Ideas are just that: Ideas. Even the ones that are good are worthless – at least on the day they’re are created. You can’t patent an idea, you can’t trademark an idea, you can’t copyright an idea, and your idea by itself doesn’t make a very valuable trade secret.

We tend to focus on ideas, on genius and creativity, the light bulb, the “Eureka” moment. But let’s be honest. There’s very little more poignant than the unfulfilled “Idea Person,” the person who thinks she could have been a contender in business if she’d just had the time/just had the money/just had the team to fulfill all of the dreams in her head. You have to do something with an idea, and chances are our “Idea Person” just didn’t stick with it – if only to get to the liberating point of understanding that the idea was not, really, in fact a contender.

I’ll be posting a series of blogs laying out five top things a high potential technology founder needs to do immediately if she wants to deliver on all of the high potential her idea might possess. I’ll be addressing the founder as “you.”

Number 1: Decide if you want a co-founder.

The direction here may have something to do with just how big is your idea. If this is the big idea, and if your high potential idea means someone has to develop the app and someone has to sell the product and someone has to be able to do the magic that quants can do with Excel, and this is all starting from scratch, then maybe you don’t want to start off alone.
This very first decision – whether to go it alone or bring one or more trusted folks into the founder’s tent – ties in completely to what resources you have available to you.

When founding a company, there are three basic assets you can make use of: human capital, social capital, and financial capital.

  • Human capital means knowledge derived from formal education and the skills derived from prior experience. A founder with a great amount of human capital can reduce the chances he will get blindsided by something he really should have known could happen. Some call it “wisdom.” I believe you can have a lot of wisdom even when you’re 24 if you’ve studied a lot and worked a lot and kept your eyes open. And there are loads of people my age (which is older than that) who are don’t have wisdom. Point is, if you don’t have it, your human capital is less than optimal, and you may want access to it from someone else.
  • Social capital means the benefits that come from your place in information and communication networks. A startup must project itself outward, whether it’s to hire people, raise money, sell, or any number of other things. If you are an industry insider, or if you just know a lot of people, or you just love networking events, then you might have a lot of social capital. If you’re someone who just doesn’t get out much, then maybe your own social capital is, shall we say, lacking.
  • Financial capital means, well, I think we know what that means. For a founder, if you have “screw-you money,” if you can quit your job and pay for all of the costs of the new company until its projected time to become successful or not, then that’s a blessing. It’s a fairly rare blessing.

A major reason you co-found is to make up for the kind, or kinds, of capital you lack.

One researcher’s long-term study found that solo founders accounted for less than 20% percent of technology startups.
If you are a person with an idea, a sober-minded business plan might lead you to the conclusion that you need one or more cofounders if you are going to create a real business, and you might already know who they are. Or you might need to go looking. Either way, there’s someone close to coming up with the same idea in Portland, so best to get moving.

I’ll follow up soon with the 2nd action a founder needs to take after deciding to make a go of their great idea. Meanwhile, if you have any questions about the content of this article or on any business startup issue, please contact me or any of our business lawyers.

GreeneHurlocker Welcomes Business and Employment Attorney Laura Kight Musick

Laura Kight Musick, a business and labor and employment attorney, has joined the business, corporate, and regulatory law practice as Counsel at our firm, Eric Hurlocker announced today.

“Laura brings a well-developed set of skills in commercial and employment law which our clients increasingly need as their businesses grow and become more complex,” Hurlocker said. “Additionally, her significant litigation experience dovetails nicely with our firm’s growing regional regulatory practice,” he explained.

Laura practiced in Illinois and Virginia in her prior firms, and has counseled clients in employment matters, including hiring, severance and transition agreements, employment policies, and risk management and avoidance. In addition, she advised her business clients regularly about contracts, financing agreements, and corporate formation and governance.

“I’m delighted to be joining GreeneHurlocker and offering our clients the benefit of my employment law background while advising them as they grow and expand their businesses,” she says.

Laura graduated summa cum laude from the Honors Program at Murray State University in Kentucky, receiving a dual degree in English Literature and Philosophy. She earned her J.D. at the Robert H. McKinney School of Law, Indiana University, and was the inaugural recipient of the Baker and Daniels Public Interest Law Fellowship in 2008.

Knowing Where to Start

Clients wonder sometimes what they are getting into when they ask a lawyer to draft a contract. Maybe their fear is that their attorney will sharpen up his metaphorical pencil, lean his chair back to think deeply on life and law for an hour or two (on the clock), and then pull out the laptop and sit down to drafts things up from scratch, like a composer writing out each note to a (very boring) symphony. The client may fear that the lawyer views every deal is different, that everything about every deal is new every time, that everything needs to be tailored like a bespoke suit.

Every deal is different, it’s often said – I’ve heard myself say it a hundred times. That’s because the facts are different, and that’s because no two people and no two companies are alike or have the exact same priorities. But that doesn’t mean that two deals – say, two leases of refrigerated warehouse space, or two agreements for the purchase of the assets of small businesses — happening 500 miles apart (or 5000 or 5) — can’t be done with forms of contract that are 90% the same.

In fact, they probably should be done that way.

And your attorney shouldn’t be spending a whole lot of time going for the Pulitzer Prize for creative nonfiction and drafting that 90% (just a percentage used for illustration purposes) from scratch.

Unless we are speaking of some sort of business deal where the industry is utterly new, the parties are utterly idiosyncratic, and the risk tolerances are off the charts (one direction or the other), or all of the above, the same basic forms work across the board. I remember Internet 1.0 – the days of AOL and Pets.com — and the ways that lawyers were trying to draft “application service provider” contracts that expressed the concept of software programs being accessed over the Internet (what we now call Software as a Service (SaaS)). But even in that time, when the Internet was beginning to utterly change the way the world operated, the contracts were pretty much built right on top of software, consulting, joint venture and financing contracts that had been around for decades before that.

The majority of the text in a contract from 1975 (the year of the room-sized computer) – for example, events of default, remedies on default, representations and warranties, indemnification, assignment, the boilerplate at the end, and the general flow and sequence of the document — was essentially the same as the text in a contract drafted in 2000 (the year of the Pets.com sock puppet). The same is even more true for commercial real estate contracts, and even holds true for many types of intellectual property agreements.

And it goes without saying that 90% of the text in an accounting SaaS services agreement from 2017 is going to be the same as a payroll SaaS services agreement from 2019.

Anyone who tells it differently is trying to create mystery where there really should be none.

That’s my candid and honest observation How does this insight relate to you?

As outside corporate general counsel, under our OPENgc service offering, GreeneHurlocker is keenly focused on saving a client time and money while still delivering the legal assistance a client needs, when they need it. We avoid reinventing wheels. We’ve been practicing enough years, in widely varying industries and for companies of all sizes, to have an experienced, intuitive sense of what works and what doesn’t, and how the work we’ve done before may apply to the work we are doing for a client now. When a client picks up the phone and asks for an individual contract to be done or an entire deal to be quarterbacked, the client can rest assured we are not starting from scratch. Instead, we’re applying all the knowledge and work we have already done.

We’re here to guide you to the end of your deal. But we also know where to start.

Three Things an Entrepreneur Should Keep In Mind

Entrepreneurs are fascinating to me. They are tied to the mast by their own natures. They can’t do anything else but what they are doing. They have to create. Even when the most they get from friends, family, and the guy on the next bar seat is a cocked eyebrow, maybe even a yawn.

Most of the entrepreneurs I deal with have long come to terms with the way they are wired. To them, it’s just who they are.

As amazing as they are in their inspiration and knowledge base, they (like all of us) can often use a bit of perspective. As general corporate counsel, that’s a place I can make an impact. It’s my job to scan broadly to see the forest my client is walking through, and keep a closer eye for the falling tree that might hit him on the head.

While I am not a huge believer that something as complex as entrepreneurship can be reduced to lists, there are a few home truths that have emerged for me in doing this over and over again. It’s in the form of advice I could give any person looking to forge a business where there was nothing before.

THINK IN THE ALTERNATIVE.

An entrepreneur needs to be able to analyze a challenge along at least two separate tracks — Pro and Con, Option A and Option B, these assumptions and those assumptions. This is easy for a lawyer to say; it’s what we’re trained to do. (“I did not kill that man! But if I did, this is why I should get off.”) But you know what? We all need to do it from time to time, and someone starting a business from scratch really needs to do it.
Bill is the founder of a company that is developing a family of apps for use within the construction industry. He has always believed that the vertical he needs to focus on as the way into the industry is commercial banking. It’s the insight that got him into this venture and it’s what he’s always assumed would work best. But a friend who’s given good advice on this venture before is telling him that it’s the building trades, people on trucks like plumbers and roofers, who would adopt the product first and then evangelize it within the construction world. Bill’s intuition has done him well in life to this point, and he’s loath to step away from it now. In fact, not just “going with his gut” feels like a rejection of who he is. But Bill needs to be able to mentally take a moment and imagine a world where he’s wrong and his friend is right. He should play out both scenarios – from past first principles, through the present, and into the future. And he should do it without kicking and screaming. It’s a waste of energy.

You won’t lose yourself if you think in parallel. Your brain is big enough to keep control of the whole process and bring everything back in when it’s decision time.

EMBRACE THE LIKELIHOOD SOMEONE ELSE IS DOING THE SAME THING

I’ve sat across the table from several company founders who have given me the look of a deer in the beams of an approaching car when I’ve told them my cursory Google search has shown others are already operating in their space. In these cases the entrepreneurs have gotten so romanced with their own idea, and so deep into the feedback loop created by unexamined assumptions of uniqueness, that they’ve failed to consider that others are already there, or nearby.

There really are few new ideas under the sun. (And I plan to write a piece about why ideas, alone, are pretty worthless.) It only makes sense that in a world full of smart people who, receiving the same inputs and experiencing the same things as you, would hit on your idea.

A new company is the most compelling when it is the first to market to solve a pain – or, better put, the first to (i) solve the pain (ii) with a sustainable business model. It can also be pretty compelling when there are folks already doing what you do, but you have some special angle on it – which may be no more genius than really good branding or deep industry knowledge. You need to know which of these scenarios – commodity or non-commodity – apply to you before you can really have any business entering the marketplace. They are very different realities.

You can’t know any of this before you fall out of love with your idea for a brief moment and survey the landscape with a sharp and skeptical eye.

REALIZE THAT YOU ARE YOUR BEST PRODUCT.

You will probably abandon your original business concept. It’s natural, somewhat inevitable, and completely healthy. It’s not failure. It’s life. We didn’t get dating right the first time we tried it. When we finished a term paper in college it probably was about something different than when we wrote the first word of it. Reflective light technology revealed that Da Vinci first had Mona Lisa looking off to the side, without her half-smile.

The original idea is what gets you into the game. Without the original idea you wouldn’t have had the reason to start the journey. But it will almost certainly not be what your product or service actually turns out to be.

What will still be there is you. Which, to me, means that you are the real product.

Smart early-stage investors know it, or come to know it if they see enough deal flow. There are a lot of ideas, a million slices of the pie of industry – lots of places to do good work. Lots of opportunity. But there are only so many people really who have the persistence and character to think as clearly as spring water while at the same time wading chest-deep in muck. These people are pretty rare.

It’s rare because it’s hard. The born entrepreneur has a leg up, because he really has no choice but to work to become that person. He may not know that’s what he’s doing, but he’s doing it nonetheless.

If you would like more information on these entrepreneurial essentials or have an issue in business law, please contact me or any one of our Virginia corporate law attorneys.

Good Times and Great Fellowship in Harrisonburg

Thank you! Harrisonburg partner Jared Burden and the whole GreeneHurlocker firm are grateful for the great attendance of our business clients and colleagues at our “Top Five Risks When You Sign A Contract” session with our friend Tom Mendez of McGriff Insurance Services yesterday afternoon in our offices in the Smith House. And the after-party, our Open House celebrating the successes of our first year of our Harrisonburg office, was incredible fun and filled the art gallery downstairs. We are pleased to report that all those who attended shared our Holiday spirit and wishes for a prosperous New Year were frequent and heartfelt. We can’t wait for another time to get together, so watch for our next seminar announcement in the New Year. You can see the fun for yourself below.