Subsequent adjustments: Overview, definition, and example
What are subsequent adjustments?
Subsequent adjustments refer to changes or modifications made to a contract, agreement, or financial arrangement after the initial terms have been set. These adjustments are typically made to account for changes in circumstances, such as shifts in the market, changes in legal requirements, or performance discrepancies. Subsequent adjustments can apply to a wide range of areas, including pricing, timelines, or scope of work, and are often included in contracts to ensure flexibility and fairness in response to unforeseen events.
For example, a supplier might agree to make subsequent adjustments to the price of goods if the cost of raw materials rises unexpectedly after the contract is signed.
Why are subsequent adjustments important?
Subsequent adjustments are important because they allow contracts to remain relevant and fair over time, even when external factors change. Without provisions for adjustments, a contract may become unrealistic or burdensome, leading to disputes or unmet expectations. These adjustments help businesses adapt to new circumstances, such as inflation, changes in regulations, or other unforeseen factors, without requiring a complete renegotiation of the contract. They provide flexibility and can prevent conflicts between the parties involved.
Understanding subsequent adjustments through an example
Let’s say a construction company agrees to build a facility for a client, with the project scheduled to take six months. However, during construction, new local building codes are introduced, requiring additional work. A subsequent adjustment to the contract might involve extending the project timeline and increasing the cost to account for these changes.
In another example, a service provider agrees to a set monthly fee for maintenance services. If the client requests additional services that weren’t originally included, a subsequent adjustment might be made to reflect the increased scope of work and associated costs.
An example of a subsequent adjustments clause
Here’s how a subsequent adjustments clause might appear in a contract:
“The Parties agree that any subsequent adjustments to the terms of this Agreement, including but not limited to pricing, delivery schedule, or scope of work, will be mutually agreed upon in writing and incorporated into this Agreement.”
Conclusion
Subsequent adjustments ensure that contracts remain adaptable and fair in the face of changing circumstances. They help prevent disputes by providing a clear process for modifying terms as needed. Including provisions for subsequent adjustments in contracts allows businesses to stay flexible and responsive to changes without the need for renegotiating the entire agreement. This is essential for maintaining smooth, long-term relationships between parties.
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.