This contract tip is about whether to extend your existing contract or negotiate a new one.
This scenario happens all the time. You have an agreement in place and the end of the term is coming up. You want to continue the relationship.
It would be really easy to amend the contract for another year or two. It is especially appealing if the relationship terms are complicated and the last contract negotiation was difficult.
But that might not be the right choice for your situation.
So how do you decide whether to extend or negotiate new terms?
Here are four things to think about as I make this decision:
1. New Pricing
Do the existing pricing structure and terms still work? If the financial aspects of the deal need to change, you may want a new contract. Doing so provides more freedom to change things to reflect the new dynamics.
2. New Policies
Do the old terms meet your current compliance requirements? A lot has changed in the last few years, especially relating to privacy and data security.
3. Liability Limit
Will a longer term expand your liability limit? Many limitations of liability tie the amount to what was paid during the term. Adding more years may increase your the cap and your exposure.
4. Product and Service Level Failures
Check how you measure product and service levels. Are they based on the term of the agreement? If so, the longer term could dilute the impact of individual failures. That may be a good or bad thing depending on which side you are on.
What other things do you think about when deciding whether to extend or negotiate a new agreement?
