When it comes to business agreements, one term that is likely to come up frequently is “contract variation.” As a business owner or manager, it’s important to understand what this term means and how it might affect your organization if and when contract variations occur.
Simply put, a contract variation is a change or alteration made to an existing contract. These changes can be made for a number of reasons, including changes in circumstances, new information that comes to light, or changes in the needs or requirements of one or both parties involved.
In some cases, contract variations can be made relatively easily and informally. For example, if you have a contract with a vendor to supply your business with a certain product, but for some reason, you need to change the delivery date or the quantity of the product, you might be able to simply call or email the vendor and request the change without needing to formally document the variation.
However, in many cases, contract variations need to be formally documented and agreed upon by both parties in writing. This is especially important if the contract you are altering has a significant financial or legal impact. For example, if you have a contract with a client to provide a certain service at a certain price, and you need to change the scope of the service or the pricing structure, it’s important to document those changes in a new version of the contract to ensure that both parties are on the same page.
When making contract variations, it’s important to follow the terms set out in the original contract as closely as possible. This might include following specific procedures for requesting and approving variations, or including specific clauses or terms in the new contract that address the changes being made.
Another important consideration when making contract variations is the potential impact on any related contracts or agreements. For example, if you have a contract with a vendor that is reliant on a separate agreement with a third-party supplier, changing the terms of your contract could have a trickle-down effect on all parties involved. It’s important to consider these potential impacts before making any changes to a contract.
In addition, it’s important to ensure that any contract variations comply with relevant laws and regulations. For example, if you are making changes to an employment contract, there may be certain labor laws or regulations that you need to consider when making those changes.
Overall, contract variations are a common part of doing business, and it’s important to understand how they work and the potential impact they can have. By being proactive and documenting any changes in a clear and thorough way, you can help ensure that contract variations don’t cause any unnecessary confusion or disputes down the line.
