Most companies understand the importance of reviewing business contracts before they are executed. However, frequently these contracts are filed away and forgotten about after signing. This can result in outdated documents that no longer meet the needs of one or more of the parties, and can even lead to legal liability.
Your company should review all of its business contracts at least annually for several reasons, including:
Legal Compliance
Because laws applicable to your business contracts may have changed, it is important to review and update them if needed to ensure that your company is continuing to meet all of its legal obligations. Failure to do so could result in fines or other legal sanctions, not to mention damage to your company’s reputation.
Changing Business Needs
Since your business contracts were last reviewed, your company and/or other parties to the contract may have taken on new customers, gone into new lines of business, hired additional employees, or otherwise grown or evolved. As a result, business contracts should be reviewed at least annually to ensure that they still meet the parties’ business needs, reflect how the parties currently operate, and protect their legal interests.
Better Customer Engagement
If you have business contracts with customers, you should make sure not only that their current needs are reflected in the contracts, but that the contracts are written in a way that your customers can understand. Dense, jargon-filled contracts can turn customers off – especially lengthy “terms and conditions” sections or other fine print.
Ensuring that a customer understands its obligations under a contract will help promote trust and provide a foundation for future business dealings.
Employee Communication
Your employees need to know what is expected of them, including their contractual responsibilities. It is important to review your business contracts and ensure that everyone on your team understands their rights and duties, especially if they were recently hired.
This is particularly important for higher-level employees and executives, who may be specifically mentioned in various contracts and who have more important roles in your company. As appropriate, these individuals should be directly involved in the contract review process.
Change Clauses
Some of your contracts may include change clauses that permit renegotiation or termination under certain conditions even before the contracts expire. Identify any contracts that contain these clauses and see if you can take advantage of them because of changed circumstances, such as dissatisfaction with the current service.
Depending on a contract’s terms, even if it has a change clause, you may not be able to renegotiate it immediately. However, a thorough review will help prepare for future renegotiations.
How to Review Business Contracts
To review your business contracts, start by identifying all of your existing written and verbal agreements. Single out provisions that could provide the basis of a renegotiation, such as exclusivity and minimum purchase requirements, continuous improvement clauses, benchmarking provisions, prices, goods or services provided, etc.
In addition, consider anything that might have changed the parties’ expectations. For example, look to see whether the parties’ course of dealing, email or written correspondence, side agreements, or other factors could be considered modifications of a contract. If so, factor these into your renegotiation strategy.
Contact Counxel Legal Firm
The laws pertaining to business contracts can be complicated and fact-specific. If you would like to talk to an attorney about drafting or reviewing a business contract, contact us at (480) 744-6621 or at request@counxel.com. Don’t forget to check out the good things that others are saying about the services they received from Timothy Coons on Google.
This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact request@counxel.com or (480) 744-6621 to request specific information for your situation.
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