Description of change in terms: Overview, definition, and example
What is description of change in terms?
A description of change in terms refers to a clear and detailed explanation of any alterations made to the terms of an existing contract or agreement. This can involve changes to payment schedules, obligations, rights, or other key aspects of the agreement between parties. The description of the change in terms ensures that all involved parties are fully aware of how the modification impacts the original agreement, providing transparency and clarity.
For example, if a lender and borrower agree to extend the loan repayment period, the description of change in terms would outline the new repayment schedule, interest rates (if applicable), and the duration of the loan extension.
Why is description of change in terms important?
The description of change in terms is important because it ensures that all parties are aligned on the new terms and helps prevent misunderstandings or disputes. When modifications are made to a contract or agreement, it is crucial for the updated terms to be clearly communicated and documented to avoid confusion and ensure the legality of the changes.
For businesses, providing a clear description of changes in terms helps maintain smooth business operations and protect against legal challenges. For individuals, understanding how changes in terms affect their obligations or benefits allows them to make informed decisions and manage risks effectively.
Understanding description of change in terms through an example
A software licensing agreement originally stated that the customer would pay an annual fee of $5,000 for software usage. After negotiating, the customer and vendor agree to modify the terms to a monthly payment plan of $450, instead of the original annual fee. The description of change in terms would clearly outline that the new payment structure involves 12 monthly payments of $450 each, effective starting from the next billing cycle.
In another example, a business loan agreement specifies an interest rate of 5% for the first three years, but after renegotiation, the lender agrees to lower the interest rate to 4% for the next two years. The description of change in terms would detail the updated interest rate, the new payment schedule, and any additional conditions under the modified agreement.
An example of description of change in terms clause
Here’s how this type of clause might appear in a contract amendment:
*“The parties agree to amend the terms of the original agreement dated [date]. The following changes are made: (i) The payment schedule will be revised from an annual payment of $5,000 to monthly payments of $450, commencing on [date]; and (ii) The new term of the agreement shall be [duration], and all other conditions shall remain unchanged unless otherwise specified.”*
Conclusion
A description of change in terms is crucial for documenting and communicating modifications to any existing contract or agreement. It ensures that all parties involved understand how the changes will affect their obligations, rights, and the execution of the agreement. Whether it pertains to payment terms, deadlines, or other contractual provisions, a well-documented description of change in terms fosters clarity and helps maintain legal integrity in the modified agreement.
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.