Renewal of Contract: Everything You Need to Know
A renewal of contract should not be automatic. It's important to understand the difference between a contract renewal and an extension.4 min read
2. Contract Renewal Checklist
A renewal of contract should not be automatic. It's important to understand the difference between a contract renewal and an extension. Renewing means the recreation of a legal relationship or replacing an old contract with a new one, rather than just an extension of a previous contract or relationship.
When the time comes to process a contract renewal with a vendor or client, it's recommended to do some research first. Start by going through your original contract and look for anything that has become obsolete or needs altering. For example, you may want to raise prices. Once you have completed your research, you can send an official letter offering a renewal contract.
Things to Consider from the Original Contract
When you are conducting your research to determine what should be kept from the original agreement, keep these items in mind:
- Duration and terms of renewal: How long was the original contract period? Was the timing satisfactory for your company, or would a longer or shorter contract be preferable?
- Objectives and deliverables: Were the original contract objectives satisfied? If you were having something delivered to your office, for example, was the correct amount of product delivered in a timely manner?
- Pricing: Have the costs to manufacture or procure a product increased from the time when the original contract was drafted? If the client is a loyal customer, it might be wise to offer the same price or a discount.
- Other possible vendors: If a contract is up for renewal, this is a great opportunity to compare rates and services of similar vendors. Even if you are pleased with your current vendor, if you can find much lower rates with another vendor, it might be wise to switch. It is worth asking your current vendor whether they would match the other vendor's prices.
Contract Renewal Checklist
Create a checklist for your contract renewals so that you don't forget anything. Set one or more reminders long before it is time to renew a contract. Contract renewals can take significant time, which is why you should be sending renewal notifications out far in advance so that the other party has time to do a thorough review. If there is an auto-renewal set up, the reminder should be sent at least 30 days before the auto-renewal is triggered.
When you are completing a renewal review, you should take into consideration what was changed during the previous review. Did you make any changes to the contract during an initial review or during a mid-term review? Be sure stakeholders are advised of past changes during renewal reviews. The review history of your contract can be beneficial because it may provide insights into the areas that need addressing.
Make sure to forward the contract and documents to key stakeholders and appropriate internal departments. Information relating to contracts should be sent to important departments like legal and finance. Your legal division will vet the terms of the contract for potential risks, and your finance department needs all this information to verify that the costs being paid out are in line with what the contract shows should be paid out.
Be sure to email the appropriate documents and follow up to verify that they have everything they need. If numbers or language need adjustments, make sure the reviewer tells you what changes were made.
Verify that important contact information is still accurate. During the course of a contract, it is possible for names, titles, and positions to change. If there is an emergency, you should have the ability to quickly reach out to the necessary people to address the problem rather than wasting valuable time trying to locate the right individual.
You should also check with anyone who was involved in the last review process. Confirm that they are still the right person you need to work with during the contract renewal. In the event that this person no longer handles this task, ask them to forward your request on to the new person.
After the review is complete, make sure the new changes have been recorded and set the new renewal date. If you store your contract in the cloud, you can reduce or eliminate the number of handoffs. Your cloud service will store every change that was made, who made the change, and when the change was made.
Any other departments involved in the renewal process, like finance and legal, need to have access to the contract. This is why having a central repository is a smart idea. The central repository should be intelligent enough to determine who needs to act on the contract next.
If you need help with a renewal of contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.