Understanding Unilateral Contract Modification

Unilateral contract modification occurs when one party changes the terms of the contract without input from other contracting parties. This is actually very common, especially in updates to service agreements or Terms and Conditions. These changes are legal and enforceable when your new contract conforms to best practices, including providing proper notice to the user, noticeability of the changes, and affirmative assent by the user.

When a company fails to update their agreements in a way that follows best practices, it is easy to create a situation where your new agreement is legally unenforceable. Effective contract management lets you control how you get these unilateral changes accepted. When you obtain affirmative assent from the user, you can create enforceable unilateral modifications.

This article will help you understand how to protect the enforceability of your agreements, even when you make unilateral modifications.

What is unilateral contract modification?

Unilateral modifications are changes to an agreement made by one side rather than negotiated between the parties. These types of unilateral changes may occur due to consumer service agreement provision or changes in data privacy regulations. Agreements like Terms and Conditions are commonly modified without renegotiation with the other party.

Every time a consumer reads the news, uses their social media profile, or buys a product online, they agree to contractual terms. When these terms need to change, users are often directed to the new changes and a simple method to agree to the new rules. 

This is enforceable when done the correct way. You can obtain the user’s affirmative assent through a digital contract, such as a clickwrap agreement, or follow the contract modification best practices covered further on. Failure to follow certain best practices—which comply with state and federal law—will likely mean your unilateral changes are unenforceable. 

Are unilateral contract modifications common?

Unilateral contract modifications are actually very common. They most commonly occur in transactions like those listed above. However, they may be part of many other types of contracts as well. A company may want to have control over the terms of its contract and be able to make unilateral changes in response to the market.

For example, a sales contract might specify a particular price for a product but with a clause that accounts for changes in underlying supply costs. A unilateral modification provision can protect a company from fluctuations in raw material prices by accounting for them ahead of time.

While they are common, they are still prone to costly errors and mistakes. Without strong contract management process in place such as in-depth record-keeping and contract metric analysis, these unilateral changes may violate the law or fail to provide proper notice to users. 

Are unilateral contract modifications legal?

Yes, if done according to best practices and meet certain legal requirements.  The Electronic Signatures in Global and National Commerce Act (ESIGN Act) and the Uniform Electronic Transactions Act (UETA) legitimized digital contracting and electronic signatures. They play a key part in deciding whether a unilateral contract change is permissible and enforceable against a user.

Over the decades these laws have been in effect, courts have reviewed unilateral changes to determine their enforceability. In most cases, the court’s decision hinges on whether the user had “notice” of the changes and affirmatively assented to them. Cases where credit card or telecommunication industries unilaterally modified terms were often decided by the court’s analysis of whether:

  • The user was given notice of the unilateral changes
  • Whether the changes were highlighted or buried in the full contract
  • Whether the user was given access to the changes and how easy it was to identify them
  • Whether the user affirmatively assented to the changes in some way.

Courts have consistently focused on how noticeable the changes are to determine whether they will be enforced. When a user cannot easily determine what has changed, the court will likely choose not to enforce the new provision. The more you can do to make the change easily noticed, the more likely it will be enforced. Your contract can remain enforceable when your company follows unilateral modification best practices.

Who can unilaterally modify contract terms?

The party who presents the contract is usually the party that can unilaterally modify it. Unilateral modifications are usually made by large companies working with individual consumers. These consumers are unlikely to be involved in a legal negotiation with a large company for their service. Instead, they expect that company to handle those issues fairly and legally.

This is very different from bilateral modification, where two parties negotiate the terms of an agreement. This usually occurs between two sophisticated business entities with legal teams negotiating a large contract.

Examples of unilateral contract modification

The following examples demonstrate when a company may want to make unilateral changes to an agreement:

Customer service agreements

Customer service agreements are especially common with service providers, such as software service agreements. Many software agreements contain “change of terms” provisions that permit a seller of a service or product to unilaterally change certain elements of the contract without prior notice to the buyer. These may include terms like:

  • Service price
  • Interest rates
  • Late payment penalties
  • Due dates

Customer service agreement changes are typically unilateral, without input from the customers. Many are simply posted online, and its terms state that continued use of the service indicates acceptance of the changes. This type of provision often fails in court, as the user had no notice of the changes. 

Terms and conditions 

On nearly any website, a company may require that a user agrees to its terms and conditions before continued use of the website or a product. Changes to these terms and conditions are common and are nearly always unilateral. A customer is not involved in negotiating these changes, but they may be entitled to notice of the changes. Failure to get the user’s affirmative consent to these changes may mean it is unenforceable in a later dispute. 

Service level agreements

A service level agreement (SLA) defines the terms between a customer and client. It is also commonly known as a vendor contract. These agreements define the level and quality of service provided, how it will be measured, and explain any remedies or penalties if a party falls short. SLA’s are commonly modified through unilateral changes. Changes to specific product offerings or how failures are measured may be changed without negotiation if the proper notification procedures are followed.

Unilateral modification best practices

If your company wants to modify agreements with its users unilaterally, you can do that. You just need to follow best practices to ensure your agreement remains enforceable. These best practices reflect years of industry experience and analysis of relevant case law. Too many companies skip these important benchmarks and find out their changes are ineffective too late.

1. Let the signer know you’ve changed the terms

Proper notification to the signer is one of the most important parts of any unilateral change. The user must be told that the agreement has changed. This does not have to be complicated. Users can be notified of changes through:

2. Obvious and conspicuous notice about changes

The changes should be obvious and conspicuous. Any changes should be in bold and possibly in all caps. Companies that bury their changes within the rest of the agreement often discover that a court will not enforce those changes because it did not adequately provide notice to the consumer.

A company may also list all unilateral changes in a single place in the agreement where it is noticeable and specifically marked. The more you can make the changes obvious, the more likely it will be enforced.

3. Get affirmative assent to the new changes

You should get affirmative assent to these modifications when you change a contract. Too many companies assume their “change of provisions” clause in a contract will suffice. Case law is unclear on this, and many courts have held that, without affirmative assent from the consumer, they will not enforce changes.

Affirmative assent can be gained through easy one-click methods like a clickwrap agreement. These agreements provide an easy way to deliver the changes to the user and require them to take an affirmative step to agree to it by checking a box or clicking “I agree.” A sophisticated clickwrap can then record the acceptance details and create an audit trail to bolster the enforceability of unilateral modifications.

4. Keep accurate records

Many companies don’t fail in notification but in record-keeping. When it comes time to enforce an agreement, you have to show that the user agreed, when they agreed, and what they specifically agreed to. Sophisticated eSignature and clickwrap technologies store information automatically in a central repository. The information is automatically stored to make it easy to find and use to enforce an agreement.

Enforce your unilateral contract modifications

Unilateral contract modification is permissible and enforceable when you follow best practices. Using obvious and conspicuous changes the user can find easily will make your contract enforceable. When your contract acceptance method shows affirmative assent to the changes, you can demonstrate that the user actively agreed to the modifications. Ironclad’s contract lifecycle management software gives you the tools needed to create enforceable and easy-to-use agreements.

Request a demo to learn more about creating enforceable unilateral contract modifications for your business. We are here to help.

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