Contract renewal strategy focuses on maximizing existing accounts instead of relying on new business for companies. When contracts are signed, a fixed duration is also stated. The contract is applicable only within this period, known as tenure. After the tenure ends, the agreement is null and void. If all parties are satisfied with the contract, they may renew the same agreement. While renewing the contract, the parties can also change the existing terms as needed.
What are the Benefits of Contract Renewal?
One of the most beneficial parts of contract renewal is that it helps maintain existing business relationships between parties and is cost-friendly and time-saving. Here is why contract renewal is important for companies:
- The renewal stage helps to provide an opportunity to make necessary changes to the original agreement. This helps to eliminate loopholes and renegotiate terms to make the agreement more beneficial to each party.
- Since the original agreement is already available, it acts as a draft. Moreover, the parties that fill the agreement fully are in a better position to analyze errors and different aspects where it is lacking. During contract renewal, making necessary changes is easier and helps save time.
- Most businesses involve lawyers to draft their contracts. This helps them ensure that it has no loose ends in the contract. Since the initial draft is already present, the cost reduces tremendously when it comes to contract renewal.
- During the tenure of the first contract, all the parties involved establish trust and confidence in one another. This way, they are better positioned to have a long-term alliance with the same people involved rather than seeking out a new party.
What is a Contract Renewal Strategy?
Organizations planning to renew contracts often look for ways to improve implementation. There are many complicated decisions to make, from identifying loopholes to hiring expert lawyers to draft the renewed contract after eliminating the problems in the previous one.
Tips for Contract Renewal
If you are planning on renewing your contract, here are some things that you must keep in mind:
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Identify the Terms You Wish to Get Changed
Things are constantly changing in the market, which means the services exchanged as per the agreement also need to be altered, especially in terms of finance. For example, when you often rent out your property during contract renewal, the rental cost is increased per the market charges. You may also be interested in other aspects of the contract. For example, if you are the tenant and wish to get the maintenance or insurance charges waived off, or to get things repaired, etc.
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Check Whether All Parameters are still Valid
Before signing any contract, all parties involved often conduct a test or survey to establish the parameters. For example, in the case of a commercial lease, the property’s condition is established within the contract. This often changes over time. Therefore, it is important to keep tabs on such parameters and ensure that they are amended or changed per the present condition. Only then the contract becomes fair and just to everyone.
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An Opportunity to be in Alliance with Known People
During the tenure of the original contract, you come to know the other parties involved quite closely. Thus, building up a relationship of trust and confidence. Continuing the contract after renewal with the same party puts you in a better position. It helps you eliminate several problems that might have occurred otherwise, such as looking for other parties and working according to their terms.
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Look for New Terms to be Added
Contract renewal gives you a scope to add in new details that might have been missed out in the first go. For example, repair costs for tenants. If it is absent in the initial contract and you would like to get that added to the renewed one, it is possible to renegotiate the terms and even add in new parameters.
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Change in the Number of Parties
When it comes to a multi-party contract, it is also possible to only partly renew the contract and change the other parties. For example, in the case of third-party contracts, the middle party can renew the contract with either party and change the other, and vice versa. This is only possible in a multi-party contract where the contract between two people is not directly affected by the other parties involved.
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Consider Renewal Beforehand
When you sign the initial contract, you are already aware of the tenure and when the contract is expiring. If you plan for contract renewal, waiting until the last moment is ineffective. Rather, start working on it rather early. Giving it a headstart will give you ample time to understand the changes needed and negotiate the terms accordingly. This helps to omit a null period as well.
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Helps You Look for Other Offers
While negotiating for a renewed contract, there is always a possibility that the other party is searching for other terms, such as rental amount or services mentioned within the contract. Working on it early also allows you to look for other parties interested in what you offer. This helps you save time and keep your services ongoing without major lags.
Conclusion
If you are interested in making it easy to search through your contracts, LawInsider’s contract repository makes it easy for you to upload your documents and find the hidden contracts among them. From 100 to 100,000 contracts, there are no limits and no hidden fees for the amount of documents that you can organize. With secure access and encryption for all files, you can be sure that your contracts stay safe and private.
References:
- https://aavenir.com/glossary/contract-renewal/#:~:text=Contract%20renewal%20is%20a%20chance,of%20products%20and%20services%20provided.
- https://www.evisort.com/blog/six-best-practices-to-modernize-your-contract-renewal-strategy
- https://ironcladapp.com/journal/contract-management/contract-renewal-strategy/
- https://www.contractexperience.com/resources/why-contract-renewals-are-important
Tags: Contract Renewal, Contract, Strategy, Renewal Strategy