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The Basics of Modifying Existing Contracts

One issue which businesspeople tend to think about when they develop contracts is modifying an existing agreement. Suppose a business owner develops a contract with a customer or vendor. Both parties come to an agreement, they both sign the agreement, and everything appears to be working fine. But, then suppose that the business owner wishes to modify the agreement in some material way. What would be the outcome if this happened? What sort of legal implications are involved with a departure from the mutually accepted terms of an established contract?

In this post, we will discuss the basics of modifying existing contracts and cover some of the implications which follow when a modification is made.

Modifications Require Independent Consideration

The first point to make regarding this issue is that modifications can be viable. When two (or more) parties come together and form an agreement, this agreement isn’t something which is necessarily fixed or static. Agreements can be modified, but modification requires the same process of contract formation which applies to the original agreement. In other words, when a party wants to add something to an existing agreement, the same elements of contract formation need to be checked off, just as is the case when the original agreement is being created. In other words, modifications require an offer, acceptance, new consideration, and so forth.

Consider a simple example. A merchant creates a purchase order with a customer for a fixed number of items to be delivered at a specific time on a specific day. The customer wants to modify the contract so that the items be delivered two days earlier. Because this modification will require the merchant to adjust its working schedule and will be more difficult, the merchants request additional compensation. The customer agrees, and the original agreement is amended to read that the same number of items will be delivered two days earlier than the initial day.

In this situation, the contract would be successfully modified, and the modification would be enforceable, because the parties engaged in the same negotiation process as the one which applied to the original terms. The customer could not simply amend the contract unilaterally and expect the merchant to comply. The modification needs its own consideration, and must be accepted as normal by the other party.

Modifications May Have Various Implications

This example we used is straightforward, and so it is fairly easy to resolve and understand. But modifications may not always be this straightforward, and it’s easy to understand why this is the case. In many cases, people need (or choose) to amend existing contracts because unexpected circumstances develop which demand quick responses, or which necessitate new terms. When a modification is made without independent consideration, the implications can vary. We’ve seen this discussed previously when we tackled the issue of substantial performance.

In cases involving substantial performance, there is a “modification” (or a “breach,” to put it in less favorable terms), but the modification is so immaterial that it doesn’t warrant any sort of financial or equitable remedy. The implications of a unilateral modification will largely depend on the concrete impact of the modification; this essentially means that the modification will be assessed on a case-by-case basis.

Contact Trembly Law for Additional Information

Topics such as contract modifications are precisely the reason why business owners need an experienced business lawyer by their side. The business lawyers at the Trembly Law Firm can help you as you navigate the complex issues of contract formation. Businesspeople need to execute contracts on a regular basis; having an experienced business lawyer on your side can save you time, money and headache. Call the Trembly Law Firm today at (305) 431-5678 for more information.

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