Tuesday, August 14, 2012

It's Not Just the Contract

Your Deals Can Trump No-Amendment Language

For your ongoing projects with your service providers and customers, do you have written contracts spelling out the work to be performed and stating that any changes must be in writing?  Good.  If there are any changes or expansions to the project from the initial scope of work or purchase order, do you document them?  Great.  Will taking these steps prevent all disputes over what services are included in the project?  Not always.

Many companies use contracts stating that all changes must be in writing.  (If yours don’t say so, have a lawyer review your contract forms now.)  The provision alone, however, is not enough.  The law in many states provides that a course of dealings between parties will trump a provision that says contracts may only be changed in a signed amendment.  This can lead to expensive disputes about whether the work to be provided under the contract or any amendment was really part of the services included in the price.

What can you do to best protect yourself?  Document any changes to a contract or purchase order.  When there are changes, employees should inform management and counsel to make sure that there are no changes to either party’s expectations as to what work is be done and the price.  If there’s a possibility of different understandings, you might want to discuss them with the service provider or customer early on so that there are no surprises later.  Doing so can help ensure a better long-term relationship with your business partners and avoid expensive litigation.  Finally, consult with your lawyer to review your contracts and tailor best practices for your ongoing relationships.

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