Q&As

In a business-to-business contract where a contractual long-stop date has passed but the parties wish to continue with the contract, should they document their intention to continue or enter into a new contract?

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Published on LexisPSL on 30/07/2019

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • In a business-to-business contract where a contractual long-stop date has passed but the parties wish to continue with the contract, should they document their intention to continue or enter into a new contract?
  • Long-stop date
  • Variation
  • Termination and replacement of existing contract

In a business-to-business contract where a contractual long-stop date has passed but the parties wish to continue with the contract, should they document their intention to continue or enter into a new contract?

Long-stop date

As stated in the Drafting Notes to clause: Long-stop date definition, the term long-stop date is commonly included in an agreement that is subject to conditions, with the definition setting out the date by which such conditions must be satisfied or waived. It could, however, be used to represent a date by which certain obligations in an agreement must be met or certain rights in an agreement must be exercised.

The parties should firstly consider the contractual purpose of the long-stop date and the implications of the long-stop date passing. Consider whether the long-stop date is for a condition precedent to be fulfilled prior to the agreement properly coming into force, or if the long-stop date refers to a date by which an obligation must be performed by one of the parties under an already in force contract. The consequences of the long-stop not being met will depend upon how that provision interplays with other contractual provisions such as those regarding term, termination rights, liquidated damages, waiver and consequences of termination clauses. Consider whether as a result of the long-stop date passing the contract has already terminated or never come into force

or whether a party has the right to bring an in force contract to an end.

In answering this query, we have assumed that the parties are considering either documenting their ongoing relationship by way of variation to the existing contract or by terminating the existing contract and replacing it with another. There may be alternative requirements or options open to them depending upon the analysis of the contractual considerations set out above.

Variation

Contracts can be varied in a number of ways:

  1. in writing

  2. orally

  3. by conduct

  4. unilaterally (if permitted under the contract)

  5. by waiver, or

  6. by sustained minor breach

See Practice Note: Contract variation, particularly at sections: ‘What are the methods of varying a contract?’ and ‘Written variation’ and Commentary: Variation: Halsbury’s Laws of England [373] for guidance on how to vary a contract for these purposes.

You may also find the following Precedents useful:

  1. Variation agreement

  2. Letter of variation

  3. Letter of extension

  4. Deed of variation

See also Q&As: What are the requirements for incorporating the terms of an agreement which is being varied into a deed of variation? and Can a contract be varied by a chain of emails between the parties?

Note also that the ways in which a contract can be varied may be restricted by the contract itself. Therefore, it is important to check whether the parties to the original contract have agreed any contractual terms pertaining to future variations of it.

Termination and replacement of existing contract

In this situation, it will be particularly important to consider the consequences of termination of the original contract under its terms, and the parties liability under that in the given circumstances.

For further information, see Practice Notes:

  1. Termination and expiry of contracts

  2. How to terminate an agreement

  3. Drafting termination notices—contract breach together with the suite of notices to terminate in: Contract termination—overview

You may also find Contract termination—checklist useful.

Additionally, for a precedent deed of termination, see Precedent: Deed of termination of contract.

See also Precedent: Deed of release and waiver for the purpose of releasing one party from its contractual obligations and liabilities and waiving rights to enforce the

 
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