Contracts, Contracts, Contracts... Read 'Em Well!
Contracts are important documents... for many entrepreneurs, they are the life blood of the business... written agreements which specify, sometimes in great detail, the terms and conditions for the sale of a product or service.
Not a week goes by without a client asking for a contract review. So many of my clients show the foresight and value judgment to ask for advice in advance and that's great... it's where I can really bring care and concern to the transaction, at the time when the other party wants to do business with my client and is willing to reasonably negotiate in order to seal the deal. So far, so good!
Having passed the first milestone... that is, having given or received a written agreement for your product or service, you naturally proceed to perform or await performance by the other party. All seems to be going well... both parties are satisfied, proceeding with the work, billing and paying for services rendered on a monthly basis and then, all of a sudden, a hiccup occurs. It's not unusual...it's not bad... it's business!
So, now what? Well, if you are like most entrepreneurs, you sort out the issue, agree to the solution and move on. But, wait a minute... didn't you forget something?
In the blur that becomes our daily business lives, too often we forget that most important, last step... we forgot to document both parties' agreement to that hiccup solution. Both parties were satisfied at the time, but will surely have vague memories of the resolution months down the road, when the contract is complete and it comes time for final payment... it's not deliberate or scheming on the side of either party, it's just natural!
What's the final step in resolving that hiccup? Document it, of course! And, document it according to the terms of the written contract which you signed months ago and haven't looked at since.
There are two standard provisions in every contract (or there should be if you have reviewed and negotiated the contract upfront). One provision is what we call "modifications" and the other is "notice." The first tells you how the contract can be modified and the second tells you what process to use to do so.
The first provision tells you that modifications (undoubtedly the resolution of that first hiccup involved a solution which strayed from the terms of the original contract, which is okay, since both parties agreed) must be in writing and signed by both parties.
The second provision specifies, in detail, what form that writing must take... usually fax, certified mail, overnight mail... and when the notice is actually effective... immediately upon receipt via fax, upon signature or refusal of certified... you get the picture. Of course, so much of what we document nowadays is done electronically that we may be tempted to do a short-cut and simply document the resolution via e-mail... which, for the uninitiated, unless electronic mail is included in the notice provisions of your contract, is a technical violation of the terms agreed to. However, an exchange of e-mails can at the very least show that both parties agreed to the contract short-cut and will serve you in good stead down the road.
So, what's my advice?
After both parties have agreed to the change and before you move on to implement it, revisit the contract.
Follow the contract provisions for modification and notice of such modification.
Just as you documented the original agreement in writing, be sure you document any change to the agreement in writing, in at least some format, even if informally.
Remember, if it's true that "a contract is only as good as the paper it's written on," it's also true for the modifications! Make sure to give these the same attention you gave to the original document.