The use of contracts is standard and necessary practice among most businesses. When businesses allow lawyers handle major aspects of a company’s contracting process, or there is a contract management team to oversee the business portfolio, oversights that could have become problematic for businesses can be avoided.
Managing business contracts can be more complicated that many realize. It is easy for finer details to slip through the cracks when circumstances change without the contract being appropriately adjusted. When running a business or working on a specific project, it is essential to keep business contracts clear, up-to-date, and understood by all parties involved.
What Types of Business Contracts Need to Be Updated?
There are many kinds of agreements that businesses rely on to keep operations and projects running smoothly. Some types of business contracts that should be updated regularly include:
- Buy-and-sell contracts
- Client or customer agreements
- Commercial leases and real estate contracts
- Employment agreements
- Equipment leases
- Financial agreements, including loan documents
- Non-compete agreements.
- Non-disclosure and confidentiality agreements
- Privacy policies
- Service provider or supplier agreements
- Shareholder or partnership agreements
- Software licenses
- Website contracts
Why Should Business Contracts Be Regularly Updated?
Even when business contracts and related agreements are drafted by a lawyer, they still to remain living, breathing documents. A document that gets written for a business today may not always be the document needed tomorrow, as neither business nor laws are stagnant. The terms and conditions of a business contract need to evolve and vary with the growth and development of the company.
When renewing a company’s terms and conditions in a business contract, consideration should be given to the following:
- Any verbal arrangements in place
- Implied terms of the contract
- Regulation and legislation with regard to provision of services and compulsory disclosures to customers
- Industry practices and professional best practice rules
- Company policies
It is crucial for businesses to review and renew their contracts regularly to ensure that terms and conditions reflect a company’s current operational feasibility, business arrangements with customers, and regulatory standards in place for businesses.
Terms and conditions of contracts enhance businesses and provide legal protections should any problems arise. There are several reasons companies should continuously update their business contracts, including the following:
- Keeps company compliant with laws and regulations
- Minimizes and manages dispute risk
- Provides alternative methods to mitigate litigation risk, such as arbitration or mediation dispute resolution
- Protects company’s intellectual property
- Limits company’s liability and reputational risk
- Sets expectations, securing a valuable working relationship
How Often Should Business Contracts be Updated?
How often certain contracts should be reviewed and updated can vary depending on the nature and scope of each agreement. The following is a general guideline as to when to update different kinds of business contracts:
- Every two years: Not many business documents only need to be updated occasionally, but there are a few. Company contracts, such as operating agreements and other general records, usually fall into this category. Certain situations may necessitate a specific review prior to the two-year mark, such as the departure of a partner or change in ownership.
- Annually: The general rule is, that when in doubt as to when a business contract should be reviewed or updated, the safest practice is once a year. Multiple agreements have one-year terms, including leases, licensing contracts, non-disclosure, or confidentiality agreements.
- Biannually: Some contracts need to be reviewed more frequently than the most common one-year mark. Financing and professional service agreements warrant additional oversight to ensure the company is on track to fulfill all obligations. Professional services contracts can often involve substantial fee agreements with accountants or attorneys, so companies should check that they are getting an appropriate value.
- Quarterly: the increased frequency of quarterly contract reviews can catch matters that could lead to bigger issues. Quarterly assessments can also be necessary for budgeting and reporting purposes like payroll and tax matters.
- Monthly: Some business contracts are simply of a short duration, of an extremely high value, or with relatively unreliable partners. These types of contracts require diligent oversight and frequent communication.
All updates to business contracts should be discussed, agreed upon, and signed by every involved party. Hiring a knowledgeable Philadelphia employment lawyer can help your business avoid serious problems like breach of contract. Having a skilled employment lawyer by your side can ultimately save you time and money, a civil lawsuit, and the reputation of your company.
Philadelphia Employment Lawyers at Sidkoff, Pincus & Green Protect Clients and their Business Contracts
Reach out to one of our accomplished Philadelphia employment lawyers at Sidkoff, Pincus & Green for all your legal business needs. Call us today at 215-574-0600 or contact us online for a free consultation. From our office in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.