Burdensome agreements: Overview, definition, and example
What are burdensome agreements?
Burdensome agreements refer to contracts or obligations that impose excessive costs, risks, or disadvantages on a party, making them difficult or impractical to fulfill. These agreements may arise from unfavorable terms, changing circumstances, or unexpected financial burdens that outweigh the benefits of the contract.
For example, a supplier agreement that requires a company to sell goods at a fixed price during a period of rising production costs could become a burdensome agreement.
Why are burdensome agreements important?
Understanding burdensome agreements is important because they can significantly impact a company’s financial health, operational efficiency, and overall viability. Recognizing and addressing such agreements allows businesses to mitigate risks, renegotiate unfavorable terms, or pursue remedies to limit potential losses.
For businesses, clauses addressing burdensome agreements in contracts can help define the parties’ rights and responsibilities in the event of financial hardship or other unforeseen challenges, promoting fairness and minimizing disputes.
Understanding burdensome agreements through an example
Imagine a manufacturing company signs a long-term supply contract requiring it to purchase raw materials at a fixed price. Over time, the market price of the raw materials drops significantly, making the fixed-price terms uncompetitive and financially burdensome for the company. To address this, the company may seek to renegotiate the terms with the supplier or terminate the contract under a hardship or force majeure clause.
In another example, a software company agrees to provide support services under a contract with unrealistic deadlines and heavy penalties for delays. If the project scope expands unexpectedly without additional compensation, the agreement could become burdensome, prompting the company to renegotiate terms or seek relief.
An example of a burdensome agreements clause
Here’s how a clause addressing burdensome agreements might appear in a contract:
“In the event that the performance of this Agreement becomes excessively burdensome due to unforeseen circumstances beyond the control of either party, the affected party may request a renegotiation of terms. If the parties are unable to reach an agreement within [Insert Timeframe], the affected party may terminate this Agreement upon providing [Insert Notice Period].”
Conclusion
Burdensome agreements can create significant challenges for businesses, impacting their financial stability and operations. By recognizing and addressing these agreements, businesses can protect themselves from undue hardship and maintain fairness in contractual relationships. Including clauses that allow for renegotiation or termination in cases of excessive burden helps mitigate risks and promote flexibility in contracts.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.