Can You Change a Contract by Email or Through Your Conduct?
Commercial arrangements change all the time.
A customer asks for a different delivery date. A supplier agrees to amend its pricing. Two businesses decide that a particular contractual requirement is no longer necessary.
Often, nobody thinks to formally amend the contract.
Instead, the change is recorded in an email, discussed during a meeting or simply becomes the new way the parties work together.
But has the contract actually changed?
Informal Changes Can Create Uncertainty
Whether an informal agreement is legally effective will depend on the circumstances and the wording of the contract.
This is one reason businesses should be cautious about assuming that an exchange of emails, a telephone conversation or a change in behaviour has automatically amended an existing agreement.
Many commercial contracts contain a variation clause setting out how changes must be made.
For example, the agreement may state that any variation must be in writing and signed by authorised representatives of both parties.
If a contract contains this type of provision, an informal conversation between two employees may not achieve what either business assumes it has achieved.
What About Email?
Email makes the situation particularly easy to overlook.
Imagine a customer emails:
"Can we change the delivery schedule to the last Friday of every month?"
The supplier replies:
"Yes, that's fine."
Operationally, both sides may treat the issue as settled.
Legally, however, there may be more to consider. Does the existing contract prescribe a process for variations? Did the people exchanging the emails have authority to agree the change? Are there other contractual provisions affected by it?
A short email conversation may not address any of those points.
Changes Through Conduct
The position can become even less clear where nothing has been expressly agreed at all.
Perhaps one party begins performing an obligation differently and the other party accepts that approach for a long period.
If a dispute subsequently arises, the parties may disagree over whether the contract was varied, whether a particular requirement was waived or whether the original terms still apply.
That uncertainty can be expensive to resolve.
Create a Clear Record
When an important commercial term changes, the safest approach is usually to document it clearly.
Depending on the agreement, this might involve a formal variation agreement, an amendment signed by both parties or another process specified in the original contract.
The important point is that everyone should be able to identify:
what has changed;
when the change takes effect;
which parts of the original agreement are affected; and
what remains unchanged.
That creates a much clearer record if questions arise later.
Make the Paperwork Match the Agreement
Informal discussions are a normal part of doing business. Problems arise when important commercial changes are agreed informally but never reflected in the contractual documents.
If the way you work with a customer or supplier has changed, Lawpoint can help you determine whether those changes should be formally recorded and ensure your contracts accurately reflect the agreement between the parties.
