Many professionally drafted contracts accurately reflect the obligations of the parties as at the time of contract. What happens in the future when the parties to the contract require changes?
I have all too often come across contracts that do not adequately deal with possible variations in the future.
Variations to contracts can arise as a result of a number of reasons. Circumstances change, market forces may dictate otherwise and an agreement can be reached which will allow the parties to continue to contract. Rather than going through the trouble and expense to re-draft the contract agreeing to a variation of the contract is often a sensible way forward.
The agreement for variation itself should have the characteristics of a valid contract, i.e. it must be supported by consideration or made by way of deed. A variation permanently alters the parties’ rights. It cannot be retracted unilaterally.
Not all variations need to be in writing, but having said that it is always sensible to have them in writing. Cases that have been before the courts have shown that where variation procedures set out in a contract have not been strictly followed, variations have been seen to be allowed. Further, judges have indicated that the power (relating to the variations) should be exercised honestly and in good faith and not be exercised arbitrarily.