Contracts are an essential part of keeping your business alive and growing. When you can form an agreement with another person or company to help your business run better, both parties can have a great benefit.
Sometimes, however, there is a need to modify the agreement. While the terms seemed reasonable when you were initially negotiating, there can be circumstances that require a change in the deal points.
However, before you make any changes to the contract, you need to keep in mind that any such change will require additional consideration to be exchanged.
Understanding consideration
The simplest way to define consideration is something of legal value. Typically, for one of the parties, consideration means money.
In many cases, when you want to make a change to a contract, both parties need to have a new benefit. The benefit could be money, or it could be something else that the parties agree on.
Goods vs. Services
Before determining if you need additional consideration to modify a contract, think about what is in the contract. If the agreement discusses both goods and services, decide if the changed clause or section pertains to goods or services.
Services contracts are governed by common law. When you want to modify a services contract or a services portion of a mixed contract, you will need additional consideration. That additional consideration could be money or extra services, but there must be something more to benefit both parties.
Goods contracts, on the other hand, fall under the Uniform Commercial Code (UCC). Modifications for goods contracts do not require additional consideration, but the change must be made in good faith.
The failure to provide for additional consideration when you are modifying contracts is a common misstep for many business owners. Marquis Aurbach Chtd.’s business attorneys can help you avoid these mistakes and keep your business moving in the right direction.
