Additional agreement on contract extension

How to extend the contract? If there are a large number of contracts, participants in contractual relations forget to formalize the extension of the contract. In practice, disputes often arise regarding the terms of the automatic extension of a concluded contract and the establishment of a ban on its further extension.

LEGAL EXAMINATION OF CONTRACTS

As a general rule, you can extend the contract as follows:

• fix the condition for extending the term in the text of the contract itself;
• after the expiration of the contract, enter into an additional agreement on its extension;
• conclude a new agreement.

Deadlines

The possibility of extension must be fixed in the current contract, otherwise legal difficulties may arise.

In the case where the possibility of extension was not taken into account in advance, a separate agreement is concluded describing this important condition. It is important that the date of signing this new agreement must be included in the validity period of the main agreement. Otherwise, it may also be declared invalid if the matter comes to court proceedings.

Only after the possibility of extension has been legally secured can an additional agreement to extend the contract be concluded.

When is the agreement renewed?

If the partners are satisfied with the cooperation, they will continue it by concluding an additional agreement to change the duration of the contract, which will indicate new dates. It must be concluded before the end of the main contract - a formally expired document will not be renewed. In some cases, it is possible to extend it on the basis of clause 3 of Art. 425 of the Civil Code of the Russian Federation. But this is where problems may begin with determining the termination of obligations in the event of risks of challenge. Judicial practice in such cases is ambiguous, so it is advisable to discuss the issue of extension until the end of the validity period. If you don’t have time, sign a new document.

paper elements

The additional agreement on contract extension consists of:

• Hats.
• Main part. It is divided into a statement and a list of points.
• Signatures of the parties.

In practice, the upper part of the document is completely copied from the main contract. Only the date of signing changes, but the names of the parties remain unchanged. In addition, you must indicate the city of signing, number and full name of the document.

There are only a few required pieces of paper:

• A reference to the main contract, most of the terms of which remain unchanged. The number and date of the conclusion must be indicated.
• Indication of the parties to the contract.
• Indication of the new date until which the agreement between the parties will have legal force.
• Information that all previous terms of the contract, except for the terms and points specified in the additional agreement, remain in force.
• Number of copies of the document.

Regarding the last point, the minimum number of copies to be signed is equal to the number of parties who sign it.

Without details, signatures of both parties and the date of signing, the additional agreement will not have legal force.

What is deposit extension?

Deposit extension is an extension of the terms of the deposit agreement after its expiration.

The terms of the deposit remain the same for the new period. A deposit with extension is called reinvested.

Any deposit consists of such important conditions as amount, term and interest rate. Additionally, some additional parameters are always set, which include prolongation.

If you are interested in the question of what is the extension of a deposit in Sberbank or any other bank, then it is an extension of the validity period of your deposit agreement on its original terms with virtually no action on your part: you can lie on the couch, and the term of the deposit will be extended by itself.

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Loan agreement

Some borrowers who have entered into an agreement face financial difficulties and are unable to fulfill their obligations on time. In this case, everything will depend on the lender.

If the lender is ready to sign an additional agreement to extend the contract that satisfies the borrower, then the situation can be resolved beneficially for both parties to the agreement. If the lender does not intend to extend the loan term and revise the monthly payment amount, then the borrower faces legal proceedings.

If the decision is positive, there are several options:

• Revision of the monthly payment schedule. The amount will be reduced, making it easier for the debtor to repay it.
• Postponement of the final repayment date. For a certain period of time, the debt is “frozen” and cannot be repaid. For such a service, the lion's share of financial organizations requires an increase in total debt.
• Increasing the amount of debt.
• An increase in interest paid on a loan due to an increase in the total period of use of loan funds.
• Adjustment of the ratio of loan repayment and interest. The latter may be postponed until the final months of debt repayment. Thus, the borrower will soon be able to repay only the body of the loan.

In most cases, the document adjusts the terms of repayment of the loan body. Interest is accrued and paid regardless of the degree of deplorability of the borrower’s financial situation. Debt restructuring only moves the deadlines forward.

Moreover, for prolongation, as a rule, an additional fee is charged, ranging from 1 to 25% of the total debt.

The attached additional agreement form is aimed specifically at extending the loan agreement. One of its clauses describes the amount of debt to be paid.

Lease contract

When drawing up an additional agreement on extension to the lease agreement, it is worth keeping in mind that all transactions that concern real estate for a period of more than a year must undergo the state registration procedure. That is, if the contract was concluded for a year, and then it is extended by an additional agreement for at least a day, then this transaction must necessarily go through Rosreestr. If the contract is terminated and a new one is concluded for a year, then such a procedure is not necessary.

Concept

There is a group of goods, works, and services that the customer constantly requires, for example, electricity, Internet access, telephony.
Every customer would like to simplify the procedure for conducting their procurement activities and not place identical orders every year. It is much easier to simply extend the validity period of a previously concluded contract, rather than bother with holding new tenders. This is called prolongation - increasing the period of validity of the contract in the process of implementation by the parties of their contractual relations. According to the general rule specified in the norms of civil legislation, an agreement between the parties to a transaction can be extended beyond the period for which it was concluded. That is, the parties have the right to change the terms of the contract due to changes in circumstances (Article 451).

But it is worth considering that the activities of customers in the field of 44 Federal Laws and 223 Federal Laws must be based primarily on the specific norms of these laws.

Supply contract

Extension of a supply agreement most often has a more complex structure than all others. Additional items include the price category of the goods supplied. After all, over time, exchange rates, demand and other fundamentally important aspects of pricing change. For this reason, business partners resort to extending deadlines and changing prices. But this doesn't always happen.

In addition to the above, renewable agreements also include a storage agreement. This is due to the fact that the storage of material assets can also be extended for a specific period and documented accordingly.

The same type of renewable agreements can include a work contract. It is drawn up and signed in most cases if the construction organization does not have time to complete construction by a certain date.

Employment contract

Additional agreements may also occur in labor relations. When the employer wishes to increase the validity period of a fixed-term employment agreement, and the employee agrees with it. Moreover, this consent, according to existing legislation, must be expressed in writing.

A fixed-term employment contract is usually drawn up for a period not exceeding five years. There are different wording options for this period: until the previous employee returns from parental leave, until the end of the season, etc.

If there is a need to increase the validity period of a specific document, then you can draw up and attach an additional agreement to the employment contract.

Alternative methods

In addition to this method of increasing the validity period of the terms of the agreement, there are others. For example:

• When concluding the initial contract, one of its clauses will state that the term can be extended by exchanging electronic or paper letters. If both parties express in letters their desire to extend the contract for a specific period, then it will automatically be considered extended.
• Automatic extension according to the terms of the agreement. One of the clauses states that if there are no objections from one of the parties, the agreement is automatically extended. Such long-term agreements are common among rental agreements.
• Certain types of contracts imply automatic extension due to existing laws. These include agreements on travel insurance, water supply, and trust management. Even if these papers do not contain a clause on automatic prolongation, they are implied there.

What you need to know about automatic contract renewal

As a rule, an automatic extension is considered to be an automatic extension of the term of a contract due to its terms, without signing an additional agreement.

The contract can establish a prolongation that occurs upon notice, or a prolongation that does not require any action from the parties. As a rule, the parties independently determine the extension period. This may be a specific or indefinite period. The contract can be renewed one-time or an unlimited number of times.

If the extension clause is not observed, the contract may continue when the party wanted to end the relationship, or not last when the party wanted to continue it.

It is not prohibited to establish an extension in a foreign economic agreement.

What is meant by automatic contract renewal?

In practice, automatic prolongation can be understood as:

— automatic extension of the contract due to its terms, without signing an additional agreement;

— automatic extension of the contract by force of law. This applies, for example, to contracts for electricity supply, leases, and trust management of property <*>.

Most often, we are talking about automatic prolongation if there is an appropriate condition in the contract. It is advisable to include such a condition in contracts that involve long-term cooperation. For example, a framework supply agreement, an agreement on the organization of transportation.

The presence of a prolongation clause will allow the lawyer not to waste time on constantly monitoring the validity of contracts and signing the corresponding additional agreements.

At the same time, it makes no sense to include a clause on automatic prolongation in a contract with a one-time execution. For example, a one-time purchase and sale agreement, exchange.

If the extension of the contract is established by law, then for convenience this provision can be duplicated in the contract. But it is not necessary to do this, because... the legal norm will be applied in any case <*>.

Note : As a rule, the condition of automatic extension concerns only the term of the contract and does not apply to the period of fulfillment of a certain obligation. Thus, extending the deadline for fulfilling an obligation may have its own characteristics. For example, the terms of construction of a facility established in a construction contract can be extended only upon receipt of approval from certain government agencies <*>.

How to agree on a prolongation clause in a contract

If this condition is agreed upon, the following options are possible:

1) extension occurs by default and does not require any action from the parties. Upon expiration, the contract is automatically renewed.

Typically, this condition is supplemented with cases where the extension will not occur. For example, one of the parties will notify the other party of its unwillingness to renew the contract. It is advisable to specify the period of such notice in the contract. This will allow the parties to understand in advance the intentions of the counterparty as to whether the relationship will continue;

Examples of the wording of a condition in an agreement: “The agreement is automatically renewed for each subsequent year, unless at least one of the parties notifies of its termination no later than 10 days before the expiration of the agreement”; “The contract is automatically renewed for each subsequent year unless either party notifies the other of termination of the contract. Such notification must be made no later than 10 days before the expiration of the contract."

2) extension occurs upon notification. Here it can be provided that such notice must be sent by one of the parties or both parties.

Examples of the wording of a condition in a contract: “The contract is extended for each subsequent year, if no later than one month before the end of its validity period, the buyer notifies the supplier in writing about the extension of the contract”; “The agreement is extended for each subsequent year if the parties notify each other of its extension no later than 10 calendar days before its expiration.”

In practice, the question may arise as to what moment is considered proper notification: the moment the corresponding letter is sent or the moment it is received? In order to avoid disagreements, this nuance can also be reflected in the contract.

Examples of the wording of a condition in an agreement: “Notification is considered completed on the day the corresponding letter is delivered to the postal operator”; “Notification is considered complete on the day it is received by the addressee.”

It is advisable to send notice of termination or extension of the contract by registered mail with return notification and a list of the contents. This will allow you to confirm the date and fact of its sending.

How to correctly indicate the extension period

Most often, the parties can independently determine the period for which the contract will be extended <*>.

Note! For certain types of contracts, the law sets a deadline for their validity. For example, for a trust management agreement - 5 years <*>. The extension period specified in the contract must not exceed the maximum validity period established by law <*>.

You can specify an extension in the contract <*>:

1) for an indefinite period;

An example of the wording of a condition in an agreement: “The agreement is extended for an indefinite period if neither party notifies the other of the termination of the agreement no later than 15 calendar days before its expiration”;

2) specific period.

Here it is important to determine whether the contract will be renewed once for a specified period or an unlimited number of times for this period. It is necessary to stipulate such a prolongation condition in the contract as clearly as possible.

Examples of the wording of a condition in an agreement: “If none of the Parties to the agreement declares its intention to terminate it no later than a month before its expiration, the term of the agreement is extended for the next year, after which the agreement is terminated”; “The Agreement is valid until 12/31/2021 inclusive and is extended for each subsequent year unless either Party declares its intention to terminate the Agreement no later than a month before its expiration. This rule continues to apply after the first renewal of the contract and can be applied an unlimited number of times.”

Clear and unambiguous wording will allow the parties to avoid disputes about the duration of the contract.

What does failure to comply with the extension condition entail?

The presence of a prolongation clause in the contract does not mean that you can completely forget about the duration of the contract. So, in practice the following situations may arise:

1) the party wanted to terminate the contract, but missed the deadline within which it was necessary to notify the other party about this. In this case, the contract will automatically be extended for a specified period and the party will have to fulfill its obligations under it;

Example The contract contains the following condition for its extension: “The contract is extended for each subsequent calendar year unless either party notifies the other of the termination of the contract no later than 15 calendar days before its expiration.” One of the parties notified the other party 5 calendar days before the expiration of the contract. Since the notice period was not met in this case, the contract will not terminate. It will be extended for 1 year.

2) the party wanted to extend the contractual relationship with the counterparty, but missed the deadline by which he needed to be notified about this. In this case, the contract will not be renewed in accordance with the extension clause. And its provisions will not apply to relations between the parties arising after the expiration of the contract.

Example The supply contract contains the following condition regarding its validity period and its extension: “The contract is valid until December 31, 2020 inclusive. The contract is extended for each subsequent year, if no later than one month before the end of its validity period, the buyer notifies the supplier in writing about the extension of the contract.” The buyer notified the supplier of its intention to extend the contract on December 15, 2020. After this, on January 10, 2021, the parties signed a specification for the delivery of a new batch of goods. Since the buyer violated the notice period, the contract was not renewed and expired on December 31, 2020. This means that the terms of the agreement do not apply to relations for the supply of goods that arose on 01/10/2021. The supply of a new batch of goods will only be subject to the conditions set out in the specification.

If the notice period is missed and both parties intend to continue the relationship, they can extend the contract by concluding an additional agreement to it. And if the contract has already expired by this time, then a new contract should be concluded.

How can you terminate a contract that contains a prolongation clause?

The agreement may contain a provision that its extension will not occur in the absence of appropriate notification from one of the parties. Then, if the party does not intend to renew the contract, it simply does not send the corresponding notice to the counterparty. In this case, the contract is terminated upon expiration.

The extension clause often contains a clause that the extension will not occur unless there is notice from one of the parties. In this case, the party who does not want to renew the contractual relationship simply needs to send a notice to the counterparty. The contract will terminate and will not be renewed. In this case, you should remember the notice periods established by the contract.

In other cases, including when the notice period for termination of the contract is missed, the contract can be terminated on general grounds in compliance with the requirements of Art. 420 GK:

- by agreement of the parties;

- unilaterally by court decision;

- by unilateral refusal to fulfill the contract.

Is it possible to establish an extension in a foreign economic agreement?

Belarusian legislation does not prohibit the provision of automatic extension in a foreign economic agreement <*>. It is advisable to include such a condition in contracts that involve long-term cooperation, for example, in a framework supply agreement.

The provision for automatic extension is convenient, including for foreign economic (foreign trade) agreements that are subject to registration. Under such agreements, the bank must be notified of the completion of all operations no later than 30 calendar days from the date of establishment of the fact of their completion <*>.

The completion of all operations is also evidenced by the expiration of the contract. In other words, after the agreement has expired, the resident must send a notification to the bank within 30 days that all operations under the agreement have been completed. An exception is the situation when a party actually fulfills a counter-obligation under the contract after the expiration of its validity <*>.

If a resident forgets to renew the agreement and misses the 30-day notification period to the bank, he may be brought to administrative responsibility <*>. If the contract contains a provision for automatic extension, the contract will be extended in the absence of objections from the parties; there will be no obligation to notify the bank within 30 days, as well as liability for its failure to fulfill it.

Note! The automatic extension clause usually concerns only the duration of the contract. Such a condition does not extend the period for fulfilling the obligation under the contract, much less the period for completing the foreign trade operation under it.

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When will it be invalid

The legal force of the paper will depend on many fundamentally important points. When applying to a court, an additional agreement to extend the contract may be declared invalid in the following situations:

• In case of cancellation, legal inconsistency of the original written agreement.
• If a representative of one of the parties did not have the right to sign at the time of signing the document.
• If the main agreement has been registered with the registration chamber, but the additional agreement has not.
• If the original agreement is notarized, but the annex to it is not.

These are not all the reasons for recognizing the additional agreement as lacking legal force. In any case, when compiling it, you should adhere to generally accepted rules and recommendations.