Contract variations go hand in hand with commercial contracts. Most commonly they’re used where circumstances have changed since the original contract was signed. They’re also used where the parties spot a mistake in the contract or realise they forgot to cover off a key issue. Whatever the reason, here are 5 important points to bear in mind when you want to amend a contract.
1. Is the contract still alive?The first thing to check is whether the contract still validly exists. Once a contract has expired, it cannot subsequently be varied. Simply varying an expired agreement by inserting a new expiry date won’t fix the problem.
2. Form of variation:As with most contracts, a variation can be made orally, in writing or by conduct. However, you must always check the original contract as most written contracts have a ‘boilerplate’ clause requiring variations to be in writing. If this is the case, neither an oral variation nor a variation by conduct will be valid. You should also check whether the original contract contains any other stipulations. For example, depending on the type of amendments, you may need to follow a prescribed ‘change control’ process. Change control mechanisms are often used for operational amendments but some contracts require you to invoke the change control process regardless of the type of amendment.
3. Consideration:Variation agreements are no different from other types of contract, which mean that they need to include consideration from both parties. In layman’s terms, this means each party giving, and in return receiving, some kind of benefit. If in doubt, make sure that you execute your variation as a deed, as this avoids the need for consideration.
4. Review the whole contract and consider the wider picture:Might a variation of one clause have a knock-on effect on other clauses or schedules in the original contract? Or could there be even wider implications outside the original contract? For example, could a change in scope of one contract inadvertently affect any of your contractual relationships with other suppliers?
5. Beware amending consumer contracts:Remember that variations are just another form of contract. So if you are varying a consumer contract, you need to make sure that you comply with consumer protection legislation (most notably the Consumer Rights Act 2015) in exactly the same way as you should have done when drafting the original contract.