Contract Confusion – are your contracts still fit for purpose?

It is fairly obvious that having robust commercial contracts in place is essential for a company’s success. With this in mind, business owners spend hours drafting and negotiating their contracts before putting them to use. Unfortunately, for many business owners this is where the job ends and commercial contracts remain in use for extended periods of time without any review or update of their terms. While the view often taken is that if a contract appears to be working, there is no need to spend time or money on making changes, regular review and refining of commercial contracts not only serves your commercial needs, but can also be cost effective in the long run.

Why should you review your commercial contracts?

Firstly, it is important to regularly review and update commercial contracts in order to maintain legal compliance. As new legislation comes into effect, there is always the risk that your commercial contracts are no longer compliant. This could expose your business to fines or reputational damage and even affect the enforceability of your contracts. It is, therefore, essential to review commercial contracts and ensure they keep up with relevant legislature changes.

You may also find that the business priorities you had in mind when drafting commercial contracts have since changed or been impacted by wider factors, such as tech advances or inflation. As such, the commercial contracts your business is using may no longer be fit for purpose or reflective of current business interests. Regularly refining your contracts can help ensure that they are always serving your business’ best commercial interests, saving the need for total redrafts of key contracts further down the line and allowing your company to keep up to date with a fast-changing commercial landscape.

Similarly, regularly updating commercial contracts allows you to streamline clauses in your contracts that may not be working for your business in practice. Amending commercial contracts based on experience can prevent the frustration of getting bogged down in clauses that may have been drafted with good intentions, but proved problematic in practice. It may also be necessary to refine contracts in order to compete effectively with business competition, as you may need to change your commercial relationships in order to compete. By asking your solicitors to provide a commercially aware review of your existing contracts, it may become apparent that they need some minor amendments.

Finally, it is common in many longstanding commercial relationships for the parties to verbally agree to act differently from the contract, for any of the reasons given above. Where this is the case, it is important that the written agreement is amended to reflect these changes and minimise the risk of contractual disputes in the future. Amending the written contract ensures that both parties have the same understanding of the changes and reduces risk and exposure for your business.

How should you amend your contracts?

While it is straightforward to review and refine your contract templates, you may also want to consider amending the contracts you already have in place with other parties. This requires careful review of the current terms of the contract.

Contracts can be amended through the use of side agreements or variations, whereby both parties will sign to agree the new amendments while the rest of the contract stays in force. This way, the amendment is fully understood and agreed by both parties and becomes a legally binding contract in itself.

If the contract you wish to amend contains a review or break clause, this could be utilised to allow the refining and renegotiating of contractual terms before the expiry of the contract. In contracts that do not contain break clauses, you may wish to review the termination clause to see if this allows termination for convenience and, if so, terminate and enter an updated contract.

Key tips for keeping your contracts fit for purpose

If your business has entered into a large volume of commercial contracts, you may find it difficult to keep on top of regular reviews. It may be beneficial to create and utilise a contract diary containing key dates for each contract and keep a record of when they were last reviewed or updated.

Commercial solicitors can help review and refine your contracts on a regular basis, ensuring that they remain in the best shape to serve your commercial needs, as well as remaining compliant with any legislation changes that may have occurred since initial drafting. Putting these regular contract review procedures in place will allow you to achieve the best outcomes from your commercial relationships and revise any clauses that aren’t quite working for you.

In conclusion, it is important that you take a proactive approach to contract management and make certain that you are reviewing your commercial contracts on a regular basis. This will ensure you are getting the best contractual terms and contractual protection, saving both time and money in the long run.

The Commercial & IP Team at Berry Smith can provide specialist advice on reviewing and refining commercial contracts, as well as general commercial and business advice.

Please contact us if you would like more information about the issue raised in this article or any other aspect of Commercial law at 029 2034 5511 or