How to vary a contractMay 16, 2022
This blog post was first published on 14th March 2020
This week I’ve been told the same thing over and over.
“I can’t do that, my contract won’t allow it”
That might be the case now and although the great thing about legal contracts is that they offer certainty, another great thing about them is that 99 out of 100 offer the parties the opportunity to vary the terms of the contract. If you have an event coming up which you may no longer be able to host or a contract which you can’t perform then this blog post shares some helpful tips on how to get out of the contract or vary it.
The pandemic is impacting every single business worldwide. No business is immune but taking the correct steps can protect your business operations.
Please remember that like all posts on this site, this is information not legal advice. If you require legal advice you should seek the support from a lawyer in your jurisdiction.
1. Read your contract and your insurance policies
Sounds obvious doesn’t it but this is the place to start. Get your contract out and read it. You’re looking for a provision giving you the right to vary the contract. It usually states that this must be done in writing. There may be parts of the contract, particularly around disclosure/confidentiality which can’t be varied but that’s okay.
You’re also looking for the term “force majeure” this means superior force. It’s a contract term which comes into operation if there is an unforeseeable circumstance which arises which prevents the parties from performing their duties under the contract. Not all contracts will have these and each clause will be drafted differently. Write down the terms of what it says. Although you may not be able to apply this clause yet, you may be able to in the near future.
Read your insurance policies too. You may have a few different ones for different elements of your business which impact business operations, events and/or your own personal health. Read them and again note down the scenarios in which they will provide you with cover.
2. Start negotiating
On the basis that most contracts will allow the parties to vary the terms, it’s time to enforce that clause. Would you like to postpone an event until later in the year? Would you like to move in person coaching sessions to 1:1? Work out your end goal (best outcome) and your compromise (a middle ground). Then get on the phone. Negotiations are best done by speaking to one another. For all you know the venue host is sitting their with the same worries as you, wondering how they are going to staff the event and whether they can still deliver on the catering. Your call and proposal to postpone could be just what they’re waiting for.
Similarly your clients might have been really excited to meet you in person but the no longer think it’s safe to travel. Get on the phone and discuss the options. Try and speak to someone in a senior position and explain your concerns. It may be prudent not to say that you cannot perform the contract. You do not want to be in breach. Simply explain your position and see what the reaction is. Can you vary the contract?
If the conversation goes well and you can amend the agreement, get it in writing. Send an email setting out the terms of what was agreed and get them to respond confirming that those terms are agreed. Depending on the values at stake, it may also be necessary to draft an addendum to the contract and get it signed (this is why it’s important to ensure you are speaking to someone in a decision making position at the outset. They need to have the authority to vary the terms of the contract.
3. Be Flexible
Managing the critical elements of your business first such as upcoming contractual obligations, is important. However, don’t forget to support your clients. Business relationships are going to be more important than ever. Be prepared to be flexible with payment terms, not just for the next month but most likely for the rest of the year. Just as you will be looking to vary terms so will others and they may feel too embarrassed to ask for more time to pay. If you do not have to enforce late payment penalties then don’t. There is a saying,
“People will forget what you said, but they will never forget how you made them feel”
Right now is a time to support each other in business. If you’re one of those annoying people who regularly posts about how much money they make or that they make money whilst they sleep it might be an idea to stop that for the coming weeks. If your business automates their social media posts or their email marketing you may want to sense check all of that. Posts that you drafted three months ago on a content day may seem a little tactless in the current situation.
I hope this blog post has been helpful. I know that right now it is a scary time. My biggest tip would be to look into your contracts now, do not wait until you cannot perform them. Keep talking to people and remember people do business with people, speaking to someone will give you the best opportunity to personally explain the impact.
If you need more support from me my email address is [email protected], please do get in touch.
Do you have any more tips to add to this? If you found this post helpful then please share it. I have a feeling there are a lot of business owners who are worrying about all of these things.
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