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Contract amendments are common as circumstances often change after drafting the initial terms. However, this process is often tiresome for both parties since they must rewrite and renegotiate the new terms. Implementing contract change management software makes this process far more efficient with features such as notifications of edits, change tracking, version control, and smart templates.
What is a change of contract?
A change of an agreement, or contract modification, occurs when one or both parties want or need to amend a legally binding agreement. Some agreements are modified during their creation or negotiation when a change of circumstances affects the stakeholders’ goals. Contract amendments can be made verbally or in writing and can be done either before or after signing. Furthermore, the parties can edit the entire document or just specific clauses.
The most common reasons for contract changes
There are many reasons why one or both parties may wish to adjust a contract. The most common reasons for amending contracts are to:
- Shorten or extend the duration of an agreement
- Adjust the price or quantity of goods/services covered in the contract
- Amend certain terms in the agreement (payment due date, delivery, receipt of an item or service, etc.)
- Add or omit specific terms for factors outside of the parties’ control
- Resolve a dispute over the agreement
- Remain compliant with the rules and regulations that govern the contract.
When and how can a contract be changed?
Contract modifications can occur at any stage in the contract’s lifecycle, as long as all parties agree. If the changes are relatively minor, they can be written on the original document and initialed by all parties. But, if you need to make more significant adjustments that potentially change the agreement’s integrity, you should draft a new contract.
Can you change a contract before signing?
You can even make contract modifications before you finalize the agreement. In fact, it’s much easier to change the terms before signing since you can usually integrate them during the redlining process.
What rules govern the changes in a written contract?
- All involved parties must agree upon any modifications.
- If all parties are in agreement, the modifications are enforceable by law.
- If the initial agreement has contract change control terms, both parties must follow them for the modifications to be binding.
- Contract changes must comply with the Uniform Commercial Code (UCC), the Statute of Frauds (SOF), the common law contract principles, and state laws.
How to change a contract using contract management tools
The contract change management process is often tedious and time-consuming since you usually have to go through another negotiation process and must obtain the consent of all parties. But, you can optimize this process by implementing a contract management platform.
Here are some of the ways that you can utilize contract management software to boost your amendment process:
Use contract change reports to review performance and identify changes that need to be made
The first thing you should do when adjusting the terms of the agreement is to review the performance of the contract. You can do this by utilizing the data analysis features of the contract management platform. If the agreement isn’t maximizing its performance, identify why and determine which terms need to be changed.
Find key terms and clauses in the template library
You can streamline your contract change management process by using templates from the software’s library. Simply search for the type of agreement and section you wish to change, then choose a template that fits your specific scenario.
Track changes by utilizing contract change control features
It’s crucial to track changes to ensure that all parties consent. Contract management tools such as real-time modification tracking, contract change notifications, smart redlining, and version control make the process more efficient. When you use CMS to upgrade your contract change control process, all edits are accounted for, mitigating the risk of accidentally signing off on a change that you did not agree to.
When can contract changes not be made?
While there are many cases where you can make changes to a contract, there are also many cases where it’s not legally permissible. A common example of this is when an agreement contains explicit language that the terms cannot be modified. In this case, neither party can consent to any legally binding adjustments. Contract amendments cannot be made if they also make the agreement illegal, invalidate the contract, and if all parties do not consent.
The advantages of implementing contract change management software
Contract management software is the easiest way to improve your contract change process. Its features such as advanced change and version tracking, smart templates, and advanced notifications help make the amendment process much smoother than traditional methods.
The benefits of contract change management software include:
- Notifications of contract changes
- Streamlined amendment process with contract term templates
- Real-time change and performance monitoring
- Improved agreement change compliance
- Boosted contract performance after adjustments
Olga Mack is VP at LexisNexis and CEO of CounselLink® CLM.