Varying Commercial Contracts
It is often the case that once a contract is signed and sealed, there is no more to be done with it (other than abiding by its terms, of course), but in some cases, the parties to that contract may need to alter it in some way during its lifetime. This might be to accommodate a change in business circumstances, or because the parties have re-negotiated the original terms.
In the current climate, Brexit may be another reason, not least in light of the potential for a no-deal departure from the European Union. As far as contract law is concerned, the impact of Brexit, no-deal or otherwise, is likely to be minimal, at least where general commercial contracts are concerned. When it comes to the actual subject-matter of contracts, however, the impact may be more significant.
In some cases, Brexit may result in increased costs being incurred by one or both parties in the performance of their obligations. In other cases, it may mean that certain obligations are more difficult or even impossible to perform. Moreover, getting out of a contract for such reasons may be quite difficult.
Re-negotiating and amending a contract may, therefore, be the preferred choice. The parties to the contract must agree on the variations. Sometimes a contract may allow for some minor unilateral changes, but generally speaking, agreement is necessary. There must also be an element of intention to make the changes. Furthermore, in some cases, there will be specific requirements as to the form of the variation.
Variation does not always have to be written. Sometimes oral agreements are sufficient, or even variation by conduct – i.e. where the parties to the contract do something different to what was originally agreed and set out in the contract. It is often the case, however, that contracts specifically require any changes to be made in writing.
New and Updated Contract Variation Documents
Our existing Deed of Variation is one way of making written amendments to a contract. The benefit of a deed is that it does not require consideration – nothing of value needs to be given in exchange for the variation in order to make it legally binding. The downside, however, is that deeds entail additional formalities over and above contracts in order to execute them.
We have reviewed and updated our Deed of Variation to ensure compliance with current best-practice. General improvements have been made to enhance the clarity of the document, including a new requirement to attach a copy of the amended agreement to the deed. Provisions have also been added to cater for situations in which a guarantor has agreed to guarantee certain obligations under the agreement to be amended.
For situations in which consideration is present (in this case, a sum paid specifically in reference to the amendments), a new Contract Variation Agreement has been created. The provisions of this new template are largely the same as the Deed of Variation, however, with the added element of consideration, the formalities for executing the document are considerably simpler.
The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.