1 

Business Contracts: Ensuring Flexibilities 

During the Unexpected

Being nimble during an emergency is important for effectively responding to and 

managing unexpected situations. The ability to quickly adapt and execute actions 

can mitigate the impact of the crisis. Contract flexibility is essential in emergencies; it

enables organizations to respond rapidly and modify terms, delivery schedules, 

pricing, and other operational details as the situation dictates.

Recently, the Administration for Community Living checked in with leaders in the 

aging network and asked them what they learned from previous emergencies and 

the contract flexibilities they’ve implemented. Overwhelmingly, all stressed the 

importance of establishing good relationships with suppliers that are partnershipbased and collaborative. Effective communication, trust, and cooperation are 

essential to achieve common goals and drive success for both parties. Managing 

supplier relationships effectively can help mitigate the adverse effects of any 

emergency. Interviewees also mentioned the importance of maintaining program 

continuity during emergencies, which may require purchasing off-contract. 

Circumstances should be defined in advance for purchasing off-contract to 

preserve the integrity of the supplier relationship.

When asked about contract flexibilities, here’s what our group said about what’s 

needed to be better prepared now and in the future.

• Price Management: Contract terms should be defined to ensure pricing is 

accurately described, communicated, and adhered to throughout the 

duration of the agreement. Contracts should provide price adjustment 

mechanisms to account for fluctuations in pricing caused by inflation or 

supply chain disruptions. Consider the following contract terms and flexibilities 

to ensure a solid position to manage price.
2 

o Negotiate a guaranteed fixed cost when possible. Leverage volume or 

usage, number of deliveries, and payment terms to secure the lowest 

possible price.

o Include an escalation clause to define the circumstances when 

suppliers can increase prices. When possible, include a price cap that 

limits or controls the allowable increase. Target a maximum price 

increase between 5%-10%, if possible. Factors impacting the cap include 

market conditions, production costs, and the interests of both parties. 

o Include an indicator of inflation in contracts to evaluate whether a price 

increase is fair and warranted. Include an official government source or 

economic research institution that regularly releases updated 

Consumer Price Index (CPI) data and related reports for “away from 

home” food purchases, supplies, and services. The CPI can provide 

insights into trends, but it’s important to consider the broader economic 

context and specific facts affecting costs.

• Supply Chain Disruptions: Include contract flexibilities that allow sourcing 

ingredients locally, temporarily switching to different suppliers, or adjusting the 

menu based on available resources. Develop a written list of acceptable and 

appropriate substitutions. Product yield, taste, acceptability, allergens, and 

nutrition should also be part of the decision-making process for proper

substitutions.

o Allow for product changes or substitutions based on availability, 

storage limitations, and any dietary restrictions that might arise during 

supply chain disruptions.

• Delivery and Service Modifications: Consider flexibility around delivery 

methods and service locations. For instance, if your usual dining area 

becomes inaccessible, you might need to arrange food delivery to different 

locations, outside storage, or implement a grab-and-go service model.

• Termination or Suspension Clauses: Include provisions that allow for 

temporary suspension or termination of the contract if a disaster severely 

impacts the ability to provide or receive services. Define conditions under 

which this can occur, timelines, and any associated penalties or 

compensation. Timelines can include options at the 30, 60, and 90-day 

intervals.

• Contract Length: Reduce the length of contracts and opt for extensions to 

allow evaluation of the goods and services provided. Length flexibilities allow 
3 

for immediate responses to market changes and determining whether a 

longer-term commitment should exist.

• Annual Performance Review: Include the opportunity for performance reviews 

in contracts. The review will provide the platform to evaluate performance 

over the year and discuss positives and negatives, along with the opportunity 

to exercise flexibility if needed.

• Force Majeure Clause: This is a standard clause that outlines unforeseeable 

events (like natural disasters, fires, strikes, etc.) that could prevent one or both 

parties from fulfilling their obligations. It should detail how the contract will be 

affected in such cases, possibly allowing for temporary suspension or 

termination without penalties.

Additional contract flexibilities that might prove helpful include the following.

• Health and Safety Protocols: Food service providers must implement 

enhanced health and safety protocols to protect staff and customers. These 

changes often require additional expenses and adjustments to operations, 

which could affect the terms of existing contracts.

• Insurance and Liability: Clarify how insurance coverage and liability will be 

handled in case of damage to facilities, equipment, or other assets due to a 

disaster. Ensure both parties understand their responsibilities and potential 

financial implications.

• Emergency Response Plan: Incorporate a section detailing how the provider 

and your organization will respond in case of a disaster. This plan should 

include communications protocols, evacuation procedures, alternative supply 

chain strategies, notification timelines, and any changes in distribution and 

service.

Remember that the specifics of these flexibilities will depend on factors like the type 

of service, location, the potential disasters you're preparing for, and the legal and 

regulatory context of your area. It's highly recommended to consult with legal 

professionals experienced in contract law to draft a contract that accurately reflects 

your needs and complies with relevant laws and regulations.

Last updated: September 2023