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Managing Contract Changes

     

Change is inevitable. And, just because contracts are supposed to be fixed agreements does not mean that they will escape this inevitability. Circumstances change, needs change, prices change, technology changes, demands change, and basically anything contained within a contract is subject to change at some point. Changes to a contract may not be ideal, but it is bound to happen eventually, and it is an increasingly frequent occurrence. Obviously, contract changes complicate the contract management process, but it does not have to derail things altogether or lead to disputes. Here are a few simple ways that the contract management team can effectively handle contract changes:

1. Use ammendments or addenda to explain changes

The management team isn't always a part of the negotiations relating to a proposed change, and more than likely, they aren't really the ones that have the final say in approving any proposed change. However, they are definitely the ones impacted by such changes and thus should not be afraid to make their needs clear. Leaders who do not deal with contract management on a daily basis may have the erroneous belief that they can simply take the final contract, cross out old terms and/or handwrite in the new ones.

This is clearly far from ideal for the contract management team because they do not want to spend time trying to decipher which language applies and which language does not. Although this may seem unimaginable, it actually happens all the time. Thus, contract management teams need to be proactive and advocate for the consistent use of amendments. This means using an actual template or form that will clearly identify which contract terms will no longer be applicable, as well as the exact language that is intended to replace it. 

On the other hand, an addendum should be used to propose a change that is completely new to the agreement. People often confuse amendments with addenda, but they accomplish different things. To reiterate, an amendment should be used to "amend" the contract, meaning it is changing something already contained in the document and replacing it with something new. However, an addendum simply adds to the existing agreement, which still constitutes a change to the contract because it expands the terms of the deal. The point is to make it abundantly clear what is changing and use the appropriate instrument to explain that.

2. Highlight any part of the initial contract that changed

Assuming that the team utilizes an amendment to create a change to a contract, the majority of the agreement will still stand as initially drafted. Thus, in addition to uploading the pertinent document that conveys the change, the primary agreement should be modified to reflect that change. This is where contract management software is rather useful because the relevant section can be tagged and a note included indicating that the particular part has changed and anyone reading it should look for the appropriate amendment. 

3. Send out an email to the entire team

Communication is probably the most important aspect of ensuring that contract changes do not disrupt the entire management process. Everyone affected by the change has to be included in all of the discussions and any email chains that are circulated. In addition, once a change has been formally approved, everyone should receive an email explaining exactly what was decided, along with a copy of the amendment (or addendum). Of course, this information will also be reflected in the online contract database, but no one should ever assume that certain members of the team will even know to look there if they do not receive notification to do so.

4. Update any previously created alerts

After implementing a contract change, it is important to review the management system to determine if key dates need to be modified, including any alerts relating to those milestones. In many cases, changes relate to the timeframe of the contract, so companies must keep this information up-to-date in the management software. 

Contract changes may be anxiety-inducing for the contract management team, but dynamic contract management software will help everyone keep things straight and ensure that important items are not overlooked because of the uncertainty that change creates.

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