Status quo agreements live up to their name, which will lead to a temporary legal freeze or a “stalemate” for trade relations. This impasse may give the parties time to stabilize or avoid, by other means, a default as part of an agreement. As part of a status quo agreement, creditors agree not to take legal action against a debtor for a period of time. In return, the debtor generally undertakes not to make a transaction “in the context of normal transactions” and not to make sudden or significant changes in the ownership or control of the business. Contracting parties may change the terms of an agreement by other means. This cooperation agreement does not exempt the parties from their obligations. Instead, it recognizes the economic stakes of the time and formalizes the agreement between the two companies to maintain the business relationship through the turbulence. These agreements can avoid litigation in the event of an infringement and maintain important relationships. During the status quo period, a new agreement is negotiated, which generally changes the original loan repayment plan. This option is used as an alternative to bankruptcy or enforced execution if the borrower cannot repay the loan.
The status quo agreement allows the lender to save some value from the loan. In the event of forced execution, the lender must receive nothing. By working with the borrower, the lender can improve its chances of repaying some of the outstanding debt. In Russell, the parties did not understand the structure and intent of the practical law proposition. The proposal suspends the limitation period, so that the parties are in the same position as they were when they entered into the agreement at the end of the status quo period. If they had one month before the statute of limitations expired, they would still have one month at the end of the status quo period. In other areas of activity, a status quo agreement can be virtually any agreement between the parties, in which both parties agree to discontinue the case for a specified period of time. This may include an agreement to defer payments to help a company in difficult market conditions, agreements to stop the production of a product, agreements between governments or many other types of agreements. In considering the options available, it would be wise to start a debate on status quo agreements. Although termination agreements are most widely used in mergers and acquisitions, in other circumstances it is appropriate to consider the uncertain economic periods of COVID-19. A status quo agreement is a contract and is subject to the same rules as other contracts. While recent cases involve disputes over the terms of the respective status quo agreements, problems may also arise when the contract is concluded.
The agreement may be oral, but as a general rule, the parties agree not to be bound until the agreement is written, often with the phrase “contract-compliant.” If the parties disagree on the importance or effectiveness of their status quo agreement and the defendant`s case is correct, the applicant may argue that the defendant is deterred from availing himself of his contractual rights. This can occur if there is a common acceptance of the importance of the agreement (called Estoppel by convention) or if the defendant exploited the plaintiff`s overt error in an unfair operation. These recent cases give the impression that it is difficult to reach a status quo agreement, but that agreements that meet the needs of both parties are concluded every day. Other problems may arise if the parties do not reach an agreement.