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Customer Accommodation & Litigation Strategies During The Pandemic: Three Smart Actions You Must Consider Before You Agree To “Work With” Your Customer

COVID-19’s impact on the economy has created a myriad of issues for the business community.  Perhaps the most common is managing cash flow at a time when most customers have delayed payments because they need to “dig out” from the impact of the temporary shutdowns.  As a result, many businesses desire and/or have no real option but to “work with” their customers to find ways to get paid at a discount or  over time.  Providing these types of accommodations is quickly becoming the new normal. The companies that will likely come out ahead are the ones that play it smart by accommodating their customers while simultaneously improving and securing their legal rights in case they are ever forced to take legal action against them in the future.  Here are three important “Smart Actions” to consider when working with your customers on a payment plan.


A company’s failure to review the underlying documents supporting the transaction before making accommodations is the most overlooked pitfall and common mistake in a troubled economy. Often times the documents are not reviewed until the matter is sent to legal for enforcement of the company’s rights.  This oversight will often come back to haunt you, because you may lose your ability to correct an ambiguity and/or deficiency after you gave your customer the requested accommodation. We strongly recommend reviewing the file before any accommodation is provided to the customer.  The reason is simple; it is an opportunity to correct any deficiencies and ambiguities concerning the transaction before, and in conjunction with, any accommodations being offered to your customers.  Examples include documenting changes made to the order, quantity, shipment dates, payment terms, serial numbers and/or any other missing, ambiguous or incomplete items.  This is a “golden opportunity” for companies to rectify any potential issues that may surface and hurt them down the road.

Paying attention to this detail synchronizes your business with your documentation.  Be better prepared to service your customers while protecting your interests.

Smart Action 2:  DOCUMENT & HAVE CUSTOMERS SIGN ALL ACCOMMODATIONS (Electronically or by Ink)


All accommodations provided to the customer must be documented.  In most cases, verbal modifications are not enforceable, particularly where the underlying agreements require modifications to be in writing.  A proactive company will have a standard form to memorialize any changes agreed to by the customer. These forms are of highest value when adaptable to address any deficiencies in the underlying transactions or simply to confirm certain information, such as: payments remaining and acceptance of goods and/or services performed.


Forbearance agreements differ from amendments or modifications in that forbearance agreements generally provide for representations and agreements from the customer in exchange for the company’s agreement not to enforce its rights for a set period of time.  They also often include acknowledgment by the customer of sums due, amounts remaining, admission of default, waivers of claims and a release from the customer confirming that the company has fulfilled its obligations under the underlying agreements.  Forbearance agreements are generally viewed as a more formal document which may be reviewed by legal counsel for both company and customer.

The justification for entering into a well-drafted modification and/or forbearance agreement is to provide the accommodation and reduce the risk of “problems” arising from the company’s enforcement of its rights in the underlying transaction documents, upon the breach and/or expiration of the forbearance agreement.  In most jurisdictions, these enforcement actions are commenced in state or federal court.  The goal for the company is to start the lawsuit and, if the case is not quickly resolved, move for summary judgment.  The summary judgment motion is designed to provide the company with the leverage to strike either an acceptable settlement or obtain a swift judgment against the customer without the need for a trial.  A well-drafted modification and/or forbearance agreement setting forth the consequences of and remedies for a breach normally contains a waiver of any defenses by the customer which  improves the chances that your company will prevail on a motion for summary judgment.


Electronic signature protocols should be in place to facilitate obtaining the customer’s agreement to any modification or forbearance agreement.  Electronic signatures are preferred (when set up properly) because they provide a level of authentication (i.e. how do you know who actually signed your document?) and are logistically more efficient than hard copy execution and mail delivery.  In the age of COVID-19, when social distancing and shutdowns are prevalent, electronic signatures are particularly useful.  If electronic signatures are not possible, at the very least, obtain an ink signature and a driver’s license.  Another common pitfall to avoid is having accommodations accepted by an exchange of emails.  Unfortunately, an exchange of emails is frequently susceptible to more than one meaning, giving rise to potential interpretation problems.  Use standard forms and have them properly signed.


In certain circumstances, companies should  consider using a confession of judgment to secure the restructured obligations.  Do not fall prey to this article’s last pitfall:  review the applicable confession of judgment laws with legal counsel.  The laws governing confessions of judgment differ from state to state and dictate when and how confessions of judgment can be entered against the obligor.  Confessions of judgment usually have a limited term of use.

For example, in New York, a confession of judgment is only valid for three (3) years from the date it is executed.  To the extent your confession of judgment must remain in place for a longer period of time, particularly if you are extending the term, properly drafted agreements can address and resolve this issue.  In addition, New York passed a law in August 2019, mandating that confessions of judgment may only be filed in New York against residents of the State of the New York. Shockingly, this new law also applies retroactively to any confessions of judgment executed in the past.

This creates potential problems for companies with preexisting confessions of judgment against out-of-state residents.  Therefore, if you have a confession of judgment in New York that may be unenforceable and the out-of-state customer is seeking an accommodation, your business now has a perfect opportunity to address and resolve that problem.


In the upcoming months, courts will be inundated with litigations resulting from the pandemic-related economic downturn.  This increase combined with the fact that many courts were closed for traditional commercial disputes strongly indicates that there will be delays in the court system.  As a result, striking agreements that are well-documented and secured by the entry of judgment are not only cost effective, but an efficient way  to address accounts in default.


This article represents a small list of the topics that companies must consider when working through a troubled economy.  Keep these pitfalls and advantages in the forefront of your accommodation/litigation strategies so that you can both maximize your opportunities for recovery and minimize the risks of known and unknown problems by:

(1) Reviewing the underlying documents to identify and resolve any unexpected issues,

(2) Documenting accommodations and having them properly executed, avoiding email acceptance and

(3) Using confessions of judgment with awareness, when appropriate and possible.

Educate your team on these issues and set corporate policies and procedures for handling these now common and sometimes tricky scenarios.  The quality of your documentation and your overall strategy will directly improve and facilitate your collections.  Seek proper legal counsel as your “safety net” to empower and guide you and your company to success.

We are available to advise you on COVID-19 litigation related issues. For more information regarding this article please contact Robert Cohen at or (516) 880-7234.


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