(Editor’s note: Curtis Smolar is a partner at Ropers Majeski Kohn & Bentley. He submitted this column to VentureBeat.)
A reader asks: I have a contract with a company coding my website. During work, emails flew back and forth. She now says that I changed the contract and have to pay more. What can I do?
Answer: An ounce of prevention can be worth a pound of cure. You may preclude or undercut this contention in connection with future contracts in four specific ways:
- By including a “no subsequent modification” clause in the agreement
- By advising that no one but management may modify the agreement
- By avoiding giving directions during performance which contradict the terms of contract
- By making sure no subsequent, different, or additional consideration is given to the other side.
Even if, in the end, you have inadvertently modified the agreement, you may be entitled to the original deliverable,if you’ve been careful. (And if not, at least you can cover yourself next time.) Here are a few ways how:
Include a “No Subsequent Modification” clause in your contract – One of the most common ways to preclude a contract has been altered is to plan ahead (see ‘an ounce of prevention’ above). Put a clause in your original contract, specifying that there can be no subsequent modification of the contract unless both parties sign a written agreement to that effect. This type of clause is the first line of defense if someone claims the contract was modified.
The general rule is that this type of clause is enforceable, as long as the parties’ conduct was not contrary. In other words, if you have a “no subsequent modification” clause but you act contrary to it (as by allowing and/or paying for different or additional work), then you may be found to have modified your original agreement– even if you have the clause.
But even so, including the clause is a good place to start, assuming you have a skilled attorney working with you.
Do not allow anyone other than a manager to give instructions – If you want to prevent the contract from being modified, specify exactly who has the authority to make changes. You don’t want the other side to say that someone in your organization had “apparent authority” to modify the agreement.
‘Apparent authority’ is a legal term meaning that someone who lacks authority represents to the other side that they do. (In other words, one of your employees goes on a power trip.) This can put you on the hook for unauthorized modifications. In addition to adding it to the contract, enforce internal safeguards to prevent this from happening.
Be general in any subsequent changes you have – Several jurisdictions in the United States follow the general rule that a party asserting a modification must prove the intended change with specificity and directness, so as to leave no intention of the parties ambiguous. So, if you’re going to talk, send emails and instant messages or tweet with the other side, you should not do so specifically directing the actions of the other party. A general directive to a web designer to “make the site more colorful” may not be enough to modify the contract, while a specification to “use the following code” probably would be.
Make sure no subsequent consideration is given to the other side – “Consideration” is a legal term that generally means a benefit to one party, often accompanied by a detriment borne by the other party. Generally, this means a financial transaction. “Forbearance” (an agreement to surrender a legal right) can also be consideration, even though there is no tangible benefit is conferred.
A common law school example of such a transaction is, “I’ll give you $1,000 if you agree not to drink alcohol for six months.” If I accept the deal and forego alcohol for six months, that “consideration” supports the payment obligation.
Many courts have found that if a party materially changes its position and that change is accepted by the other side, it may be enough to modify the contract. A material change in position could be a situation where a programmer is hired to do “Job A” only, and that programmer completes “Job A” and continues to “Job B” without express authority for the additional work.
One potential way to protect your company is to add language in your original contract (for “Job A”) which specifies that no additional work shall be done without specific authorization—precluding the possibility that “Job B” will be commenced without authorization, let alone that you commissioned the work.
You may be entitled to the work thus far – Even if there is a modification of the contract, that does not mean that you are not entitled to the work that was completed up until that modification. If one side creates a program for you based on agreed specifications and you pay full contract price, you are generally entitled to the product that was the original subject matter of the agreement – regardless of whether or not there was a “subsequent modification” expanding the scope of the agreement. In other words, you are entitled to what you paid for.
Following these guidelines is the earliest, best protection against a later claim that you modified an agreement. The above-referenced disputes are fact specific, and the rules in your jurisdiction are undoubtedly more specific. Check with your lawyer
Startup owners: Got a legal question about your business? Submit it in the comments below or email Curtis directly. It could end up in an upcoming “Ask the Attorney” column.
Disclaimer: This “Ask the Attorney” post discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. VentureBeat, the author and the author’s firm expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.
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