This Legal Alert addresses topics related to the COVID-19 pandemic that are most relevant to nonprofits. In this rapidly-changing environment, please contact your local Pro Bono Partnership office for the most current information. Please also bookmark the Pro Bono Partnership COVID-19 Nonprofit Resources page for information we have published or compiled. This page is being updated frequently.
Federal Loans & Refundable Payroll Tax Credits: Information about Federal loan and tax credit programs created by the CARES Act and the Families First Coronavirus Relief Act, such as the Paycheck Protection Program, can be found here.
990 Filing Deadline Extended to July 15: On April 9, 2020, The Chronicle of Philanthropy announced that the IRS has extended the deadline for nonprofits and foundations to file their informational tax returns (Form 990, 990-T, 990-PF, and 990-W) to July 15. This applies to returns that would normally be due between April 1 and July 14.
CONTRACT CONSIDERATIONS FOR NONPROFITS DURING (AND AFTER) THE CORONAVIRUS PANDEMIC
If your nonprofit has had to cancel or reschedule an event during the pandemic or has other pending contracts, we encourage you take into account the following considerations from our colleagues at Lawyers Alliance of New York. The full article is posted with permission here.
The laws of your state may impact how you negotiate or enforce a contract, so be sure to contact your local Pro Bono Partnership office for state-specific advice.
If your nonprofit is considering scheduling an in-person event for 2020, you may want to explore hosting a virtual event as an alternative. General resources for hosting alternative fundraising events can be found on the Coronavirus/COVID-19 Resource Guide page of the Association of Fundraising Professionals.
As nonprofit organizations plan for and respond to the coronavirus pandemic, they may be asking questions like:
Can we cancel or postpone our gala?
Do we have to continue meeting grant contract deliverables?
Do we have to pay the consultant who was going to run our now-canceled conference?
Often, answers are found in vendor, consultant, and funder contracts. Below are contract issues nonprofits should consider.
1. What contracts does our organization have? Nonprofits frequently have one or more of these types of contracts:
- Lease
- Vendor contracts
- Agreements with funders
- Consultant contracts
- Insurance
2. What documents do we need to understand our contracts? Make sure you have a complete copy of each contract. Many leases and contracts are renewed periodically, so you may need the original contract, as well as any amendments. If the contract incorporates other documents “by reference,” those documents are also part of the contract. For instance, many government contracts include the government’s Request for Proposals and the contractor’s proposal as part of the contract, and most leases have separate “riders” that are part of the lease.
3. What parts of the contract are most relevant to our ability to change or cancel the contract? Always read the entire agreement to start! And, pay particular attention to the clauses addressing when and how the contract can be amended or terminated. Paragraph headings and words to look for include: “amendment,” “termination,” “cancellation,” “breach,” “material adverse change,” “repudiation,” “force majeure,” and “Act of God.”
Here are some issues those paragraphs may address:
- Amendments: Who has the right to amend the contract? What must the party seeking amendment do in order to amend the contract? Do any amendments have to be put in writing? Do any amendments have to be signed off by or sent to a particular person?
- Make sure that anyone agreeing to amend a contract really has the authority to do so.
- Put all contract amendments in writing, and work with a lawyer to draft the amendment.
- Make sure notice of the amendment is sent to anyone who the contract lists as being entitled to receive notice.
- Termination:
- Which party or parties can terminate the contract?
- Can the contract be terminated for any reason, for a limited set of reasons, or not at all?
- Must the party requesting termination give the other party notice first?
- What is the required timeframe for notice of termination?
- Does the contract specify how notice must be sent (e.g. by U.S. mail or hand delivery, or is email allowed)?
- If the contract can be terminated based on a party’s breach (violation) of the contract, does that party have a right to cure (meaning a right to correct the breach) before the contract can be terminated?
- How will payment for work already performed be calculated?
- Force Majeure/ Acts of God: “Force majeure” means “a higher force.” A force majeure clause covers what will happen if something outside the control of the parties interferes with their ability to fulfill the contract. Traditionally, parties to contracts were required to carry out the contract, and anything short of impossibility was no excuse. A force majeure clause may give one or both parties a reason to terminate the contract, or excuse certain types of nonperformance. Here are some issues to consider:
- Does either party have the right to invoke the force majeure clause, or does the clause excuse nonperformance by only one of the parties?
- How broad is the clause? Does it excuse nonperformance whenever it is caused by anything outside of the control of the parties? Does it specifically include or exclude disease, epidemic, pandemic, or quarantine as a qualifying event? Is nonperformance excused only if performance would be impossible, or also if it is inadvisable, impracticable, or unlawful?
- Will the clause apply if a party proactively takes steps that aren’t required by law, regulation, or government order? For instance, if you decide to cancel a large gathering to protect staff and participants, but the government hasn’t required you to do so, will the clause apply?
- Is there an obligation to mitigate damages?
- What is the effect of the clause? If a force majeure event occurs, can you postpone performance, excuse certain types or amounts of nonperformance, or terminate the contract entirely?
Force majeure clauses can vary widely. Work with a lawyer to understand the clauses in your contracts, and to draft them in new contracts going forward.
4. Can we negotiate a change in the contract? Even if a contract does not allow you to cancel or delay your obligations under the contract, the other party may be willing to do so. Consider what leverage you may have in this situation. Talk to the other side.
This document is provided as a general informational service to volunteers, clients, and friends of Pro Bono Partnership. It should not be construed as, and does not constitute, legal advice on any specific matter, nor does distribution of this document create an attorney-client relationship.