The Importance of Contract Modification

The Importance of Contract Modification
by Deirdre Leone

At some point, everything needs to be fixed, changed, updated – or thrown out altogether. The same is true for contracts in a company or organization. Agreements are the lifeblood of a business. They are constantly referred to, edited, renegotiated, or terminated in a process known as contract modification. And to avoid risks in the future, this especially needs to take place whenever a contract has gone out of date, or there financial or regulatory changes. Whatever the scenario, it is crucial to look at contracts again with a completely fresh lens.

Now, let’s take a close look at the contract modification process and its importance for legal teams.

IDENTIFYING AFFECTED CONTRACTS

Firstly, the legal department of a company will locate the contract that needs to be updated. This could be due to policy or financial changes. A great example of a regulatory change is the coming of GDPR, CCPA, and LIBOR, which have affected contracts significantly. All of these recent regulations mean that contracts that do not already comply with the new rules need to change as a result of them. With new obligations introduced to companies around the world – comes the need for a contract modification. contract modification is a lengthy, tedious process that needs to be done right

Contract modification is a lengthy, tedious process that needs to be done right identified and reviewed, the next step is contacting the other party. This is to renegotiate terms and conditions and reach completely new agreements.

MAKING THE CHANGE

Once a contract or group of contracts are located, and the rules are set in place, legal departments must go through each agreement, highlighting errors, changed dates, policies, and areas that need renegotiating. This process does not end until the contract is sent out and approved, and the parties agree. An original contract might need to be modified to comply with all of these changes or it may need to be completely rewritten. Because contract modification is about compliance, it is a process that needs to be done absolutely right.

USING THE RIGHT TOOLS

Naturally, identifying those contracts that need to change can be rather challenging and time-consuming. The task is made even more difficult when completed manually. This is where contract lifecycle management (CLM) systems can help general counsels (GCs) and legal teams. With CLM software, manual contract review can become a distant memory. Contract modification can be a much easier and less time-consuming task. AI-powered solutions, in particular, can do all of that work for you.

Remember, new policies around contracts arise all of the time. And so do errors. But you cannot afford to use the human eye and miss those finer details anymore. So, why not reduce the stress of going through old contracts by using technologies like CLMs instead?

Contracts, after all, are extremely important to all forms of business. And to remain trustworthy and on top of constant regulatory changes, your entire contract modification process should be as secure and simple as possible. Download our datasheet, Express Contract Collaborator, for ways to keep track of modifications and contract review.

Author:

 Deirdre Leone
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