This model standstill and tolling agreement, developed in response to the COVID-19 pandemic, is intended to be a template for businesses facing problems of performance under contracts, including payment or collection. It contains the basic elements that such an agreement should include, and so provides a balanced way for businesses to place a legal “freeze” on their commercial relationship while the economy stabilizes. It does not speak to all issues that contract parties might face, but is intended to be a starting point that parties can use efficiently, preferably in consultation with a lawyer. This model agreement is, needless to say, neither intended as nor a substitute for legal advice. All users are encouraged to retain counsel when possible.
In substance, the model agreement identifies “standstill issues” and stipulates a “standstill period” during which the party owed the salient performance agrees not to seek certain remedies, and the party owing the salient performance agrees that it will not undertake a range of non-ordinary course acts that may ultimately harm the other party. It contemplates that certain obligations, e.g., for partial payments or provision of some goods or services, may continue during the standstill period. It provides suggested remedies in the event that either party breaches. In a nod to practicality, the model agreement explicitly contemplates the possibility of traditional or electronic execution, and provides a mechanism for specifying the manner in which notice should be given by either party to the other—particularly helpful during periods of the COVID-19 pandemic in which many businesses have been closed or been conducted from remote locations rather than their usual locations.
For more detailed information on this tool, please see the article that accompanied its release: “Don’t Just Do Something—Stand There! A Modest Proposal for a Model Standstill/Tolling Agreement,” by Jonathan C. Lipson, Harold E. Kohn Professor of Law at Temple University-Beasley School of Law, and Norman M. Powell, partner in the Delaware law firm of Young Conaway Stargatt & Taylor, LLP.