If you’re a small business owner, perhaps you are considering a new year’s resolution for 2014. One excellent way to refresh and start the new year on the right footing is updating your current contracts with partnering businesses and even employees. Very often, the course of dealing between you and other parties might change over time, away from what an original contract prescribes. Or maybe you plan to need more or less from the relationship in the upcoming year than was originally envisioned. Updating your contracts or renegotiating them can be a good start to protecting your business from legal action and positioning it for efficient contracting in the New Year.
Renegotiating your current agreements. Let’s say you own a bookstore. You have a contract with a publisher or distributor to purchase a certain number of books each month, at a certain rate. If you’re like many businesses, you’re starting to see an uptick in economic activity; you predict your sales will grow next year, but you need more books. Renegotiating your buying agreement may be the best way to supply your shelves and promote more sales.
Every contract can be renegotiated, so long as the parties agree to do so. Some contracts even have termination clauses allowing one party to terminate and renegotiate a future contract anew. With the help of a savvy transactions attorney, the renegotiation process can be streamlined. In the case of the bookstore owner, an attorney can help you either approach the publisher or distributor properly or determine the safe way to terminate the contract and draft a new one.
Modify existing contracts. Similarly to renegotiating your current agreements, you may benefit from modifying your current contracts to reflect changing business practices or terms. Many contracts, especially those for the sale of goods, can be orally modified by mere performance, even when a written agreement provides for no oral modifications. Any contract, no matter what the terms, can be modified by a written modification between the parties.
Going back to our bookstore example, consider the situation in which you, the owner, have made new arrangements with a distributor for how many books will be delivered and the method of delivery. Maybe the method and amount are different from the terms in the contract between you and the distributor. In order to shore up the new arrangements, it is always best to put down the new terms in writing; this may protect you in the event the distributor decides not to honor the new arrangements, subsequently costing you money from collateral contracts and lost sales. An experienced transactions attorney can help draft modification clauses and offer advice on how to write them in a flexible way.
Transition to new forms. Sometimes, it is a good idea (and consistent with the idea of New Year’s resolutions) to create new contract forms that are used routinely throughout the year. As laws and legal standards change over time, it is important to use the correct language in contract terms and conditions to achieve exactly what you want. Over time, your own needs may also change, so updating forms to reflect current business practices will streamline contracting with other parties. In the long run, transitioning to new forms, reviewed and drafted by an experienced legal professional, will help save the business legal costs and lengthy disputes.
Whatever your New Year’s resolution for 2014, all new business owners should consider renegotiating current agreements, modifying existing contracts, or transitioning to new forms. Not only will doing so make good financial success, but will also prepare you and your business for business relationships in the year to come.