Once you’ve negotiated a commercial contract, that isn’t the end of the story. Whatever the size of your business, you must ensure that your contracts remain up to date, fit for purpose, and that they reflect your evolving business needs.
Our experienced team of commercial law solicitors can help you review and update your contracts to keep pace with your changing business priorities, legal and regulatory requirements, and the market you operate in.
Contents:
Why update your commercial contracts?
Regularly reviewing and updating your commercial contracts makes practical and financial sense, particularly in uncertain economic times, for the following reasons:
- Events happen – technological advances, inflation, fluctuating economic and trading conditions, the impact of global conflicts, the financial failure of one of your suppliers or business partners – all of these will affect your contracts.
- Priorities change – your business plans may have changed since the contract was entered into. For example, your business forecast may have proved inaccurate, or you may need to respond to altered market conditions.
- Laws change – your commercial contracts must comply with relevant legal and regulatory changes.
- Insurance changes – if your insurance cover is amended, check that your risk profile in your contracts reflects this.
- Experience dictates – if a contractual term isn’t working for your business, fix it now. The other party may also find the clause difficult or may be happy to amend it to keep your business.
- Competitive drivers – you may need to adapt to keep up with your competitors. For example, your influencer marketing agreement may need to be scaled up to fully promote your growing brand and keep pace with the competition.
- Verbal changes – any verbal changes made since the contract was entered into must be included in the written agreement to ensure that they have legal effect, that both parties understand what was agreed, and to reduce the risk of contractual disputes.
- Minimising legal risks and exposure – in an unstable economic climate, you can reduce the potential for legal disputes by identifying and addressing risks. This will help your business avoid the adverse impact of another party's financial difficulties or the negative consequences of fluctuating trading conditions.
Can your commercial contracts be amended?
A commercial contract is a legally binding agreement, and changing its terms depends on the specific provisions of the contract. Our expert team of commercial solicitors can advise you on what flexibility your contract allows and how to proceed with a variation of the contract.
You can amend a commercial contract by:
- Agreement – any amendments should be contained in a new contract to avoid disputes over what was agreed.
- Review or break clause – if your contract contains a review or break clause, seek legal advice to ensure that you can amend the agreement and renegotiate terms before it expires.
- Termination – you may be nearing the end of the term, or there may be a clause allowing for no-fault termination. This can be helpful if you are in a strong negotiating position to amend the contract on better terms. You must seek legal advice before activating a termination clause or before terminating a contract.
Tips on managing your contracts
Whether you are a well-established business or a start-up, you will have entered into a whole range of contracts, from sales and distribution contracts to IP licensing agreements. It can be challenging to keep on top of all these, but a well-managed contract portfolio is crucial to maintaining your business's profitability.
These tips can help you manage your business contracts more effectively:
- Keep a key dates diary, so you know when contracts expire or when a break clause is due. Factor in time to take legal advice in advance of key dates, for example, is there an opportunity to renegotiate and change terms, or to contract with a new party?
- Allocate contract management to individuals within your organisation, so they are personally responsible for specific agreements. This also provides the other contracting party with a key contact in your business, possessing detailed knowledge of the contract.
- Take legal advice before contracts are due for review and before termination, for input on any legal or regulatory issues that may affect your negotiations. Pass this advice on to your designated contract manager.
- Ensure that staff responsible for negotiating or managing the new contract receive appropriate training.
- Contract feedback can come from many sources: your commercial solicitor, the other contracting party, your contract manager, or knowledge gained from working with other commercial contracts. For example, you agree to supply goods within 24 hours of purchase, to give you an advantage over your competitors who only offer a 48-hour turnaround. However, your increased transportation costs will erode any profit made from your increased market share. This type of information should be fed into your contract lifecycle management.
- Consider the impact of amending a contract on your other agreements, and take a holistic approach. For example, if you reduce the delivery time in your customer contracts, can you renegotiate the transportation costs in your contract with the delivery company?
- Regardless of your business size or how long you have been trading, in reality, there is often little scope for renegotiating your contracts. Be realistic about which contracts you have genuine prospects of achieving improved contractual terms for and focus on those.
- It may not be possible to change multiple contracts all at once, either because their review dates don’t coincide or because some contracts don’t allow for termination on notice. Take a tiered approach, amending your contracts when possible, even though you won’t get any immediate benefit, but knowing you will reap rewards later once you change other agreements.
- Question the other party’s motives in seeking to amend the contract. Is their amendment so unpalatable that you are better keeping to the original terms, or is there a compromise that will enable you both to secure the changes you want?
- Amending a contract isn’t a one-off. There will always be new laws and regulations, changes in working practices, or supply issues to keep abreast of. Contract reviews should happen regularly to ensure that you are getting the best from your contracts throughout their lifespan. Improved contract performance following a review will soon justify the time and money spent on updating it.
Conclusion
Setting up clear and effective contract management processes can make all the difference to your business. Our experienced commercial law solicitors can help you lay the right legal foundations from day one, ensuring every contract works in your favour and grows with your business.
Let us help you get the most out of your commercial agreements and proactively review – and, where possible, amend – those that need improvement. Start as you mean to go on and get in touch with our team of experts today.
