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Change and termination of contractual agreements

Changing and terminating contractual agreements

Long term business relationships involving, for example, contracts for ongoing supply of goods or services to be used for manufacture or resale, sometimes need to be changed, updated or ended. Varying or amending a contract or bringing it to an end needs to be carried out in the correct way if you are to avoid exposure to liability as a result. 

Changes to terms of contract will need to be agreed to by both parties (not imposed unilaterally by one party) and the agreement effecting the changes should be recorded in writing in case any dispute arises as to what has been agreed. If the changes are not in writing, it can prove difficult to enforce an oral agreement to change a contract.

Such changes to a contract are legally effective only if they confer a benefit (or detriment) on both parties. If there is a benefit or detriment to only one party, you will instead need to use a Deed of Variation of Agreement to make the changes legally effective.

Some minor details can be effectively changed without taking such steps, however. For example, updating contact details (i.e not a change to substantive terms) : such small changes can be effected by one party sending a letter to the other.

If you are selling your business, you can use a novation letter for sales or purchases to ensure that your contracts with customers and/or suppliers are successfully transferred to the purchaser.

You might need to bring an ongoing contract to an end, perhaps due to financial considerations or because you about to enter a new business relationship with a third party or you might be bringing facilities or services in-house. Whatever the reason for terminating a contract, it is important to comply with any notice period to which you have agreed in the contract.

You might decide to bring the contract to an end unilaterally using a termination letter (if permitted by the contract) but in certain situations it might be better to use a mutual cancellation or release document, particularly if a handover of duties is necessary.

A variety of documents related to change and termination of contractual agreements can be downloaded from our Business Documents Folder. Click on the heading "Related Documents" below for further information and to see those documents.

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