Contract Renewal: Everything You Need to Know

Contract renewal is the final stage in a contract lifecycle where there is an extension of an existing contract for a new term. This stage comes when businesses decide after the end of an agreement and the parties decide if they would like to continue the business relationship.

A contract is a document signed by all parties involved and talks about the terms of the arrangements decided by them. Each contract is signed for a particular time, after which it is null and void. This is known as the tenure of a contract. 

For example, during the contract renewal of a rental agreement, the rental cost is generally changed by the house owner and increased to meet the market demands. In most cases, the increase in cost is generally set beforehand. This percentage of change can even be stated in the original agreement. For example, “In case of renewal, the rental cost shall increase by 10%.” 

Benefits of Contract Renewal

Contact renewals play an essential role, especially in a healthy long-term relationship. Since the parties involved already know each other well, it’s easier to build trust and confidence and negotiate the renewal terms. 

Moreover, since the parties have experience with one another, they can better understand the flaws of the previous agreement and ensure that it is stated in the new one. Here is how a contract renewal benefits the parties: 

• Saves time and energy. It reduces the pain and effort that are necessary to draft an entire contract from scratch.
• Saves money. Instead of getting a lawyer to draft a new contract, companies can reuse the old contract to save money. 
• Builds relationships in the long run. Contact renewals help in building healthy long-term relationships with one another to help in strengthening and building trust in the business arrangement. 
• Stronger contracts. Experience with the old contract helps the parties involved to be better to better understand the original contract and its loopholes. This allows for strong contracts  that allow both sides to negotiate better and incorporate changes necessary.

How to Prepare for Contract Renewals?

When creating contracts, it is also essential to understand the state of mind of the other parties involved. Contract renewal can only occur if all the involved are interested in continuing the agreement. Thus it is essential to establish your will and intentions clearly to outline why you wish to renew the contract. 

Contract renewals mainly happen when both parties are comfortable with the operational structure of one another which is only possible when healthy relationships have been established over the past. However, evaluating the original contract and noting the challenges and changes you need are essential during contract renewals. It is also important to discuss changes with the other party involved. Bringing a lawyer to discuss these details helps smooth the process and maintain a healthy relationship. 

Role of a Lawyer in Contract Renewal 

A lawyer plays a major role in contract renewal. Here’s how:

• They help in communication between parties which helps reduce friction and arguments. It is a much smoother process where each party can put their point of view forward.
• The lawyers help integrate any new rules, regulations and policies that may not have been in place when the original contract was drafted. A lawyer looks over these and ensures that the renewed contract abides by the latest government norms.
• The lawyers make sure that all terms are accounted for based on the last agreement and that all fines are paid if needed. Before contract renewal, all terms and conditions of the original contract are fulfilled.

Things to Consider Before a Contract Renewal

If you are planning to get a contract renewal, there are a number of things to consider. Creating a checklist of things before contract renewal can help you understand contract renewal better. Here are the terms that you need to clear out before contract renewal-

• Tenure – Were you happy with the time duration of the contract period? If you felt that the original contract was of a longer or shorter duration, make the necessary changes in the renewed contract. 
• State the objectives of the renewed contract – It is essential to understand the objectives and needs of a renewed contract. Are your requirements the same, or have they changed? 

Role of a Lawyer in Contract Renewal 

A lawyer plays a major role in contract renewal. Here’s how-

• They help in communication between parties which helps reduce friction and arguments. It is a much smoother process where each party can add their point of view.
• The original contract must have been drafted a long time back. Over time, it is also possible that new rules, regulations, and policies have emerged. A lawyer looks over these and ensures that the renewed contract abides by the latest government norms.
• If any terms are missed in the last agreement, due to which either party is liable to pay an amount to the other party as a fine, a lawyer ensures that it is done. Before contract renewal, all terms and conditions of the original contract are fulfilled.

Key Terms

• Tenure – The duration for which the agreement is signed between the parties involved. 
• Original agreement –The first contract signed between the parties involved is to be renewed. 
• Renewal – Implementing necessary changes and modifications to the original contract after it is over to have a new contract. 

Conclusion

A contract renewal can help both parties as they need not look for other businesses to establish the same contract. Since the parties know each other well and have worked together in the past, the question of mistrust doesn’t arise. There is no need for a completely new contract, so it also helps save time, energy, and money. 

 

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References:

• https://www.upcounsel.com/renewal-of-contract
• https://www.sirionlabs.com/blog/contract-renewals/
• https://ironcladapp.com/journal/contract-process/contract-renewals/#:~:text=What%20are%20contract%20renewals%3F,contract%20or%20negotiating%20new%20terms.
• https://www.contractsafe.com/glossary/contract-renewal
• https://aavenir.com/glossary/contract-renewal/