Variation of terms: Overview, definition, and example
What is variation of terms?
Variation of terms refers to the process of changing, modifying, or amending the terms and conditions of an existing contract or agreement between two or more parties. This modification can apply to specific provisions, such as payment schedules, delivery dates, or other terms that were initially agreed upon. A variation of terms is typically made when circumstances change, and the original terms no longer meet the needs or expectations of the parties involved.
The variation of terms must be agreed upon by all parties, and it is often documented through an addendum, amendment, or formal written agreement to ensure that the changes are legally binding.
Why is variation of terms important?
Variation of terms is important because it allows parties to adapt their agreements to changing circumstances or needs without having to terminate the entire contract. It provides flexibility to address unforeseen issues or changes in business conditions, which is especially useful in long-term agreements where the original terms may no longer be feasible or relevant.
For businesses, being able to modify terms helps maintain smooth operations and relationships with clients, vendors, or employees. It ensures that both parties remain aligned with the evolving needs of the agreement and that the contract continues to reflect a fair and mutually beneficial arrangement.
Understanding variation of terms through an example
Imagine a business enters into a service contract with a vendor to provide office supplies for one year. After six months, the business’s needs change, and it wants to modify the terms of the agreement to include a greater quantity of supplies or to adjust the delivery schedule. The vendor and the business agree to a variation of terms, which might include a new schedule, updated prices, and revised delivery dates. Both parties sign an amendment to the contract, which formally documents the changes.
In another example, a construction company enters into a contract with a client to complete a building project. Due to unexpected delays, the timeline needs to be extended. The construction company and the client agree to a variation of terms, extending the project completion date by three months. The variation is agreed upon in writing, and both parties acknowledge the changes to the original agreement.
An example of a variation of terms clause
Here’s how a variation of terms clause might appear in a contract:
“Any modification or variation of the terms of this Agreement must be made in writing and signed by both Parties. No variation shall be valid unless it is expressly agreed to by both Parties and incorporated as an amendment to this Agreement.”
Conclusion
Variation of terms is a key aspect of contract management that allows parties to adjust the terms of an agreement to meet evolving circumstances or needs. Whether due to changes in business conditions, unexpected challenges, or mutual agreement, modifying the terms of a contract ensures that the agreement remains relevant and beneficial for all parties involved. For businesses, understanding how to properly vary terms in a legally sound way helps maintain flexibility, reduce conflicts, and ensure that contracts continue to meet their objectives.
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.