A lot of people are under the erroneous impression that contracts are static instruments that once finalized and signed must remain immune to changes in the business climate. Although contracts are intended to serve as the final version of an agreement between one or more parties, circumstances may arise that necessitate adjustments of some sort. These circumstances may be company-specific, market-induced, or economy-driven.
Irrespective of the source of change, there are going to be times throughout the life of a contract that it must be revisited and revised. Rather than fight this unavoidable occurrence, the best thing a company can do to address these situations is to have a solid plan in place for negotiating, making, and tracking contract changes. It is absolutely imperative to diligently track contract changes and here is why:
Changing Even One Term Can Change the Entire Deal
More than likely, if an actual contract change is required, the subject of that change is fairly important. Although failing to comply with contract terms as they stand would generally be construed as a breach, there are some contracting partners who have worked together for a long time and are accustomed to occasional delays or alterations, and thus do not mandate that any slight change be written out in detail beforehand. However, in the event that there will be a substantial delay or one party needs to make a significant change to a term, whether related to payments, delivery schedules, or any other aspect that will have a considerable impact on the other party to the contract, this must be mutually agreed upon in advance and formalized in writing.
Any such change necessitates a new round of negotiations (although an abbreviated version no doubt), so that the specific details of the new arrangement are decided in a manner that is satisfactory to both parties. Then, each party will likely need to make adjustments to ensure that contract performance can proceed as expected. In these instances, in particular, it is extremely important for the management team to remain abreast of the developments, so that the appropriate actions can be taken in an ongoing fashion to mitigate the likelihood of having issues arise.
Changes May Shift Roles and Responsibilities
In some cases, a change to a contract entails a shift in one company’s roles or responsibilities with respect to the agreement. More than likely, that shift will involve an expanded role or additional duties, as unexpected changes inevitably create a bit more work in the beginning. Although all contracts require diligent oversight, some contracts are more detailed than others, and a lot of different people and departments may be involved to fulfill the many different facets.
Therefore, when changes are made to these types of contracts, diligent oversight along with consistent and efficient communication are crucial to ensure that everyone is aware of what is happening and can act accordingly. Even something that seems like a slight change to only one part of a contract can have an impact on multiple players, and in many situations, interdisciplinary collaboration is necessary to get things done, so constant monitoring is a must.
Changes Can Impact the Entire Timeline
Perhaps the biggest effect of contract changes has to do with the impact that it has on the contract’s timeline. Most contracts contain important deadlines by which certain actions are expected to be completed. As a result, a change to any date is likely to have a ripple effect on all other key milestones.
To prevent this from having disastrous consequences, it is vital for the contract management team to make immediate changes within the contract management system to reflect those adjustments. Obviously, failing to do so as soon as the change is implemented may lead to further delays and confusion, as most folks likely rely on the information contained within the company’s contract database.