Which Contract Terms Does My Business Need to Update Regularly?

Business-to-business contracts form the key framework of your business relationships with third parties, including suppliers, customers, and partners. As your business grows and changes over time, your contracts must also change to reflect these changes and protect you against new risks. As such, your contracts should not be static documents but will require thought and review over time. Regular updates ensure your contracts continue to serve your business needs and keep you compliant with the latest legal rules.  This article will explore why regular business-to-business contract reviews are essential and highlight specific key terms businesses should focus on updating regularly. 

Why Should You Regularly Review Your Contracts?

Your business and its trading operations can change over time, and your standard contracts should keep current with these developments. Letting your contracts become outdated can leave your business vulnerable to legal risks, financial issues, and operational challenges. 

For example, outdated payment terms may delay receiving payments, negatively impacting cash flow. Similarly, service delivery terms that no longer align with your practices can result in disputes and damaged client relationships. Another crucial reason for regular contract reviews is legal compliance. If contracts do not reflect changes in the law, businesses risk penalties, fines, and reputational damage. 

What Key Contract Terms Should Your Business Regularly Review and Update?

Depending on your business and external changes, you may need to update a range of terms regularly over time. 

Here are some key examples of particular clauses you may need to update:

Your Payment Terms – Have They Changed? 

As your business grows, the way you manage payments may change. Whether you are shortening payment deadlines, introducing penalties for late payments, or offering early payment discounts, your contracts should reflect these adjustments to avoid misunderstandings and ensure timely payments.

For example, contracts must reflect this change if your business previously allowed clients to pay within 60 days but now requires payment within 30 days to improve cash flow. Similarly, these details must be clearly outlined if late payment penalties or higher interest rates have been introduced. Businesses may face cash flow problems, payment delays, and client disputes without regularly updating payment terms.

Service Delivery and Scope – Do You Need to Reflect Changes?

Updating contract service delivery clauses becomes essential as businesses expand or change their services. Contracts must accurately reflect current operational processes, including any updates to service timelines, quality standards, and responsibilities.

For instance, contracts should clearly outline these changes if a business has shortened delivery times or introduced new obligations for customers to comply with to deliver the services. Similarly, if the company has transitioned from offering standard products to customised services, the contract should include specific terms covering the customisation process, delivery schedules, and any additional costs. Ensuring service delivery clauses align with current operations helps prevent client misunderstandings and disputes, fostering stronger business relationships.

Data Protection – Has Your Business Processing Changed? 

Data privacy and security concerns and issues are increasingly important, particularly with the widespread knowledge and concern about compliance with UK GDPR rules. Your contracts must include up-to-date data protection clauses to ensure compliance with legal rules. If your business processes personal data, you will need to check your contracts regularly and update them to reflect changes in how data is handled on behalf of your customers. If you are a data processor, you should ensure you are reviewing your data processing clauses on a regular basis so that they are accurate and in line with your current data processing activities.

For example, if your business has begun working with new sub-processors, started collecting different types of personal data from clients, or changed its data retention periods, such changes must be reflected in contracts. Keeping data protection clauses up to date helps businesses comply with the UK GDPR and avoid costly penalties and reputational damage. Correct data processing clauses are vital for compliance purposes.

Term of Agreement – Do You Need to Alter It?

The agreement term is another critical clause you may need to review regularly. Initially, many businesses may rely on fixed-term contracts that automatically end after a set period, such as one year. However, as your business develops, you may choose to introduce automatic renewal clauses to ensure long-term commitments with clients and generate increased revenue.

If your business shifts from fixed-term agreements to auto-renewal contracts, contracts must be updated to reflect this change. The auto-renewal process should be clearly outlined, including any notice periods required to cancel or amend the agreement. This clarity will help you prevent misunderstandings and make sure all parties are fully aware of their contractual obligations, reducing the risk of disputes over contract renewals.

How Can a Lawyer Help Your Business Make Contract Changes?

Legal advice can be invaluable when it comes to contract reviews and updates. While payment terms, service delivery, data protection, and the agreement terms are crucial clauses to review and potentially update regularly, other key clauses may also require attention as your business changes over time.

Lawyers will help ensure that your contracts reflect current business practices and protect your business from legal risk. A commercial contracts lawyer can help businesses navigate the complexities of reviewing and updating contracts. Your lawyer will work closely with you to identify which terms need updating based on changes in your business operations or legal requirements. 

Or, a lawyer can advise you on whether any updates are necessary over time or if in fact your contracts remain fit for purpose. If a review reveals that no changes are necessary, your lawyer can confirm that the contract remains suitable for your business’s needs and compliant with any relevant legal requirements. Regular reviews, even when no updates are needed, can help ensure you are staying proactive in mitigating legal risks.

Regular contract reviews and updates you carry out with the assistance of a lawyer provide peace of mind that your agreements will continue to serve your business’s best interests in the long term.

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Key Takeaways

Regularly reviewing your contracts is essential to ensure they remain relevant to your business’s operations and protect you from legal and operational risks. In particular, you may need to focus on updating key clauses such as payment terms, service delivery, data protection, and agreement terms. As your business grows, you may also need to revisit various additional provisions. A commercial contracts lawyer can help you identify the areas that need updating and help ensure your contracts are legally sound and tailored to your business’s changing needs over time. 

If you need legal advice or help with a contract review or update, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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