Changing the terms of a contract isn’t just a legal technicality – it’s often a necessary part of keeping your commercial relationships effective and aligned with the realities of your business.
You may be renegotiating a supply agreement due to global logistics issues, adjusting delivery obligations to reflect increased demand, or revising pricing structures to provide your customers with more certainty in a volatile market. In other cases, you may need to update a joint venture agreement to bring in a new contributor or prevent an impending dispute.
In all these situations, knowing how to vary a contract effectively can save you time, reduce risk, and preserve long-term commercial value. Our commercial law solicitors regularly support businesses across a wide range of industries in identifying when a variation is needed, structuring the change correctly, and avoiding common legal pitfalls, ensuring your contracts remain an asset, not a liability.
Jump to:
- Can you change the terms of an existing contract?
- When and why would you vary a contract?
- Should you vary the contract or replace it entirely?
- How do you lawfully agree to a contract variation?
- Does a variation need consideration to be valid?
- Can a contract be varied by email?
- Making sure your contract variations hold up
Can you change the terms of an existing contract?
You can change the terms of a contract. How easy it is to do so depends on:
- How agreeable the other party or parties to the agreement are to varying the terms of the contract
- The existing contractual terms
- The relevant law applicable to the contract
- Your bargaining position
In the right circumstances, varying the terms of a contract can be relatively straightforward.
It is trite to say, but sometimes, the most significant improvements to profitability can be made by managing the ‘little things’ to get maximum profit and advantage from each contract.
When and why would you vary a contract?
The situations that require or justify a contract variation are numerous. Commercial solicitors find that businesses ask for help with varying contracts in cases where:
- Established terms of business need to be reviewed and varied if there is a change in legislation, regulations, or the standards required by an industry-specific regulatory body have changed.
- There is a sales and distribution contract with a provision for variable pricing. Both parties to the agreement may prefer a variation to a fixed price structure to provide greater certainty. The seller may be willing to adjust the contract price to secure a more extended contract period or make changes to what are now perceived as onerous distribution terms.
- A joint venture agreement may need a rethink if the parties to the joint venture are to remain committed to working together. To prevent a dispute or the early termination of the agreement, a variation to bring in the contribution of an additional party or an adjustment to the reward structure may be necessary.
- With a supply of goods agreement, the contract may require review if the supplier can no longer source the goods because of international supply issues.
Best practice is to review all contracts regularly, so you are not reactive to business changes but ahead of the game, spotting opportunities and avoiding issues before they become problems. Every business undergoes a life cycle, which is why managing contracts effectively and regularly updating business agreements is essential for staying commercially agile and legally protected.
Should you vary the contract or replace it entirely?
The decision on whether to vary a contract or to terminate and replace is a combination of commercial legal advice and business acumen. If your company:
- Has the grounds to give notice to terminate the contract, or the contract will expire automatically on a fixed date.
- Believes significant changes are needed to the contract; and
- It is in a strong bargaining position.
In that case, termination and replacement may offer the best route to securing more advantageous contractual terms. Deciding whether to terminate and replace or to vary an agreement is a strategic choice that’s best made in collaboration with a commercial solicitor, and a clear understanding of terminating a commercial contract is key to making the right call.
How do you lawfully agree to a contract variation?
Varying a legally binding contract can only be done by agreement between the parties to the contract. It cannot be done unilaterally unless the original contract states that one party can make changes without first seeking the agreement of the other party.
A commercial solicitor will normally advise against giving the other party any ability to unilaterally vary any aspect of the contract, so these clauses tend to be unusual.
Does a variation need consideration to be valid?
An agreement to vary a contract (known as a ‘Variation Agreement’) should be supported by consideration. For example, by agreeing to improve delivery times to two days instead of three, the other party will decide to either increase the order size or the unit price. If the variation is not supported by consideration, to be effective, the variation document needs to be signed as a deed (i.e. with an independent witness). This is also known as a ‘Deed of Variation’ rather than as a standard contract with a simple signature.
Can a contract be varied by email?
A binding contract can be formed by email, and it’s equally possible to vary one in the same way. However, it’s crucial to check the original exchange to see whether – and how – variations are permitted. The fact that a contract was agreed informally doesn’t automatically mean it can be altered informally, which is why it’s essential to understand how and why emails can amount to enforceable contracts in the first place.
What if there’s a dispute about a contract change?
Disputes over whether a contract has been varied, and the extent of the variation, should be avoided as they are an unnecessary business distraction.
For a variation of contract to amount to a legally binding variation of contract, you need to be able to show that:
- The parties agreed to vary the contract, or one party had the unilateral right to do so.
- The variation was not a one-off concession but a permanent change. For example, it was agreed that the product colour would change from red to blue on an indefinite basis.
- The variation has been executed properly.
- Consideration was exchanged for the variation or, if no consideration was provided, the variation was made by deed.
If there’s a contractual dispute over whether a contract was validly varied – and how that affects the enforceability of the original terms – commercial dispute solicitors will assess your options. The starting point is usually the contract itself, which outlines its provisions regarding variation and dispute resolution, including any clauses that specify alternative dispute resolution (ADR). If the matter proceeds to litigation, the court will interpret the contract based on established principles, and any ambiguity introduces risk. That’s why understanding how to avoid commercial disputes and minimise litigation risk, as well as having a straightforward approach to contract dispute resolution, is key to protecting your position.
Tips to protect your business when changing contract terms
Our commercial solicitors’ top tips on changing the terms of a contract include:
- Don’t rush in and assume that a contract needs to be varied just because the other party requests a change. The change may be something trivial that does not necessitate a formal variation.
- Review your contract termination rights and consider the broader implications. How will a variation of one clause in the contract affect the remaining contractual provisions? How will the variation in an agreement with one contractor affect your other contracts and contractual relationships? Contracting is like a jigsaw puzzle – all the pieces need to fit.
- Review contracts regularly so you can spot where contracts require variation and proactively manage them.
- Be careful and take legal advice where necessary.
- Make sure any contract variation is in writing.
Making sure your contract variations hold up
A contract variation that isn’t properly documented can lead to disputes, non-compliance, or the risk of unenforceable terms, especially where performance has already begun under new arrangements. Our commercial law solicitors help you assess whether a variation is legally permissible under the original agreement, ensure that all procedural requirements are followed (such as formal written consent or board approval), and prepare clear amendment or addendum documents that integrate seamlessly with the existing contract. We also help you evaluate the broader commercial impact of the change, protecting your legal position while providing you with the flexibility to adapt as your business evolves.
