Take 5: Considerations For Conducting an Annual Review of Your Form Contracts and Agreements
Happy New Year!
As we start 2024, now is a great time for you to engage in a thorough review of your form contracts and agreements. Things change throughout the year, and it is imperative to perform an annual check-up of your contracts to ensure they remain accurate and legally compliant. Below are a number of factors to consider when undertaking your annual review.
1. Changes in Applicable Laws
Many legislative bodies use January 1 as the date to implement new laws or regulations. These changes can impact the validity and enforceability of certain contractual provisions, and failure to update your contracts and agreements with current regulations may expose your business to legal risks. Whether it involves consumer protection, data privacy, or industry-specific standards, staying in compliance is not only a legal obligation but also a strategic move to safeguard your business's reputation and financial well-being.
2. Updates to Contact Information
The accuracy of contact information within your contracts might seem like a minor detail, but it is a necessary component to effective communication and dispute resolution. As businesses evolve, personnel changes occur, and contact details for key individuals may change. At the beginning of the year, take the time to review and update the contact information listed in your form contracts. Ensure that the names, titles, email addresses, and phone numbers of relevant parties are current. This small but vital step can prevent communication breakdowns, facilitate smooth collaboration, and, in the case of dispute resolution, avoid unnecessary delays.
3. Clarity on Performance Metrics and Milestones
You likely tailor your customer agreements to each specific customer. However, a form business agreement, such as a Master Service Agreement, will often outline performance metrics and milestones that parties are expected to meet. At the start of the year, revisit these provisions to ensure they remain relevant and achievable. Consider factors such as changes in market conditions, technological advancements, or shifts in business strategies that might impact the feasibility of agreed-upon metrics.
4. Force Majeure and Risk Mitigation
Sometimes, events occur outside of a party’s control that prevent that party from fulfilling its obligations under a contract or agreement. This was clearly underscored by the COVID-19 pandemic. A global event such as COVID-19 highlights the importance of including robust force majeure clauses in contracts. Force majeure clauses excuse non-performance in the face of unforeseen and uncontrollable events. The beginning of the year is an ideal time to review and update these clauses to ensure they align with the current business landscape. Consider potential risks and events that could impact your business operations, supply chain, or ability to fulfill contractual obligations. Whether it's natural disasters, pandemics, or other unforeseen circumstances, a well-crafted force majeure clause clarifies the rights and responsibilities of both parties in the event of such occurrences.
5. Technology and Electronic Transactions
Advancements in technology have transformed the way business is conducted, and this shift is reflected in the realm of contracts and transactions. At the beginning of the year, evaluate whether your contracts leverage the latest technological tools and address the challenges posed by electronic transactions. Evaluate cybersecurity measures within your contracts, particularly if they involve the exchange of sensitive or private information. With the increasing prevalence of cyber threats, including data breaches and ransomware attacks, it is crucial to implement contractual safeguards that protect the confidentiality and integrity of shared information. If you haven’t already, consider incorporating electronic signature provisions, which can streamline the contract execution process and improve efficiency. Ensure that your contracts account for the use of electronic communication methods and define acceptable forms of electronic documentation. Adapting your contracts to the digital age not only enhances operational efficiency but also aligns with modern business practices.
Starting the year with a comprehensive review of your form contracts and agreements is just good business practice. This article is meant only as a brief introduction of certain factors to consider when undertaking an annual review of your agreements. If you have specific questions about your contracts or agreements, or would like assistance performing an annual review, we’d love to connect!
LetsGo@cruxterra.com
