Modifying business contracts

June 23, 2017

In any business environment, there can be changes in current events and circumstance that give rise to the need to update business contracts. For example, there could be a change in law or policy that requires updates to the language used in the contracts you negotiate with new customers and employees. Likewise, changes may prompt a desire to create an addendum to an existing contract. As many reasons as there may be to modify your business contracts, there are just as many reasons to be cautious about creating unnecessary and unintended conflict and consequences.

If your business has a legal department on site, or works with a contracted law firm, changes to your contracts should be reviewed by experienced corporate attorneys who know your business agreements and can best advise you on making modifications.

You may be tempted to do it yourself, resist the temptation.

Corporate officers and directors appreciate the division of labor and delegation of skilled tasks. Even though a managing partner in the business wants to add some language to a contract, they appreciate that language and terms used in agreements are only as effective as they fit within the terms of an agreement in its entirety.

Making changes to the language in business contracts can be like changing the links in a chain. Depending on how the chain is used, the may be no problem or there may be a failure. Is the chain used to lock a janitor’s closet or is the chain used to keep the gears and wheels turning?

Changes to one or more business agreements could lead to the invalidation of others.

The original purpose of a contract is to memorialize an agreement as to rights, duties and what happens if parties to contracts fail to perform obligations. Contracts may incorporate other agreements by reference, and a minor change can create immediate conflicts with other business agreements.

For example, consider a hypothetical indemnification clause in a business contract that states that one party will insure against the loss of the other under certain circumstances. When indemnification clauses are used in contracts, there is usually an underlying insurance policy held by the party and underwriting the indemnification. Without insurance backing an indemnification clause, the indemnifying party would otherwise need significant cash and liquid assets on hand. Assuming there is an insurance policy supporting the indemnification clause, that policy could contain language requiring the company maintain compliance with X, whatever X may represent. If in some other contract, the company alters compliance with X, the insurance policy could become void and render the indemnification clause virtually useless.

This is a good example of common legal problems that business attorneys are trained and experienced in addressing and preventing.

Avoiding disputes among parties to business contracts by using experienced corporate counsel.

Experienced business attorneys know what to look for and what questions to ask a business person who is tasked with modifying business contracts. A good contract is clear and unequivocal about the terms, rights and obligations among the parties; a well-written enforceable contract should resolve disputes among people and avoid the need for litigation.

When you want to make an update to a business contract, working with your attorney can be as simple as exchanging emails and seeking legal advice about the requested changes. It is always appropriate to ask whether contract changes could affect the other parts of the business as well as other existing agreements.

To learn how MKim Legal works with businesses in contract drafting and negotiation, please contact the firm to schedule a consultation.

About us: MKim Legal, in Dallas, Texas, is a full-service business transaction and litigation law firm of experienced attorneys serving the Dallas-Fort Worth Metroplex.

MKim Legal, represents individual clients and organizations with business and commercial law needs. The firm also represents both plaintiffs and defendants in general civil litigation, injury, property, employment and consumer matters.

To speak to an attorney please dial (214) 357-7533. Additional information about our attorneys and practice areas is available on our website.

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