If a contract has expired, you are as a vulnerable contractor to four different types of risks: if the performance of an expired contract has been continued and the conduct of the parties can be interpreted as confirmation of that relationship after the expiry of the deadline, it is important that neither party simply ceases to terminate the benefit. This can lead to possible violations of any new tacit contract and, ultimately, compensation or special benefit. The reason is that the courts probably involve a term that can be terminated within a reasonable period of time. What, in the present circumstances, amounts to an appropriate termination depends on issues such as the length of the original contract, the obligations of third parties arising from the delivery of the contract, whether extraordinary expenses were incurred for the performance of the contract and the time to redeploy the work and equipment. The key to ensuring that an expired contract is not kept on foot is good contract management. Know your contract and oversee the performance of the contract. Meet deadlines and notice deadlines, communicate and document changes. But a cardinal rule in the development is to avoid relying as much as possible on a court to interpret a word in a certain way. Even if, like me, you think that a termination is the best way to include the process, it would be unwise to put the matter into question in a contract. In this regard, the provision questioned by the seminar participant – this agreement expires on 23 August 2007 – poses no problem, as there is no possible confusion about its importance. And if you use termination in this context, it follows that if you indicate the consequences of termination elsewhere in the same contract, those consequences apply not only when the parties take steps to terminate the contract, but also when the contract expires. Any problem resulting from the modification of an expired contract, whether it is a matter of review, a contract issue or a protest problem, can lead to bad publicity if the media is in control of the story. Public bodies need to think carefully about whether the risks associated with contract renewal are cost-effective.
To avoid situations in which contracts expire, you can establish agreements with an automatic renewal clause. This clause automatically extends a contract agreed by both parties for time extensions. Any party may refuse to renew the contract by simply informing the other party of its intention not to extend the renewal before the end of the original term. If your contract has a clause authorizing an extension, this renewal option must be exercised before the original term expires. You must obtain a written agreement on this extension. The quickest way to do this is to put together a simple document that refers to all the terms of the existing agreement. Then, as if you were writing an amendment, change all the conditions that need to be changed and make all the additions or deletions that both parties accept.