Reviving a Contract After Its Term Has Ended

Last week I received the following inquiry from reader Vance Koven:

I am moved to put this issue to you, as it is in some ways related to your comments in MSCD and elsewhere on back-dating contracts, which I agree is a no-no, especially for public companies, or making contracts “retroactively effective” in similar ways.

I have come across a number of instances in which companies have contracts that were not “evergreen,” which then expired, but where the expiration was perhaps unintentional, or the parties decided that they wanted to continue doing business after all. If the lapse has not been very long, and most of the business terms would stay the same, it may be convenient to avoid drafting a whole new agreement. I have seen cases like this where the parties sign a document that is either styled a “revival” or “reinstatement” agreement, or just an amendment to the old one, that purports to bring the expired contract back into effect. There may have been post-termination obligations under the old one, or special provisions for transactions that happened between the date the old one lapsed and the new one (or the amendment) takes effect, that the new document handles.

In one such recent instance, the counter-party questioned whether it was possible to do this, and proffered instead a recital that the old agreement had continued with a new expiration date. This struck me as wrong for the reasons you raised in the retroactivity or back-dating situations. I personally saw nothing wrong with creating an amendment that revived the dead contract <cue zombie music here>, but am willing to consider other alternatives short of either lying or rewriting the original agreement from scratch.

What do you think?

I agree with Vance. If a contract terminates because it has reached the end of its term and the parties subsequently decide to apply the defibrillator and revive that arrangement, I’d favor—as always—having the documentation reflect what actually happened. Suggesting instead that on or before the end of the original term the parties had extended the term would give an inaccurate account of the circumstances.

A gap in the life of a contract could have serious repercussions for one or more parties. For example, it might adversely affect a party’s claim against a nonparty to rights in something or other. (Anyone care to suggest any scenarios?) Creating a phony timeline wouldn’t fix that. Instead, it might raise the prospect of a claim for fraud.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

8 thoughts on “Reviving a Contract After Its Term Has Ended”

  1. I agree that this raises similar issues to back-dating. There is nothing wrong with the parties subsequently agreeing that, for the purpose of the legal relationship between them, the original contract is deemed to have continued uninterrupted even though it did not. But if the termination affected a contract with another party, or had tax or regulatory consequences, those almost certainly cannot be affected by a later agreement between the parties.

    On the other hand, the contract may be deemed to have continued in any case as an implied contract. It would be a matter of construction of the third-party contract or the relevant laws as to whether that helps you out, and if it does you might want to support that interpretation by appropriate recitals. But that still isn’t the same as inventing a timeline.

  2. I am dealing with an expired commercial lease (o.k. so its not strictly contract – it has all the real estate law ‘holdover’ baggage) where we (the tenant’s lawyer and I) have been negotiating the “new” lease for more than a year. I have actually been to court twice to evict the tenant but each time he brings current and keeps paying (and in this market a paying tenant is a good thing). We have gone through umpteen differences besides the amount of new rent and are on the xteenth version n of the new agreement – which is entitled :Amended Lease Agreement” but I and the tenant’s attorney have regarded each incremental change that is agreed upon as a meeting of the minds on that issue (not, as you will know the negotiation where nothing is agreed to until everything is agreed to). It seems to me that the existence of the expired lease influenced that outlook. Continuing the relationship IS different than negotiating a new deal with a new party. And this seems true whether or not it is a lease or a commercial contract relationship.
    The amendment portion that I think addresses the retro-activity is the rent adjustment. It explicitly looks at the expiration/termination time and forward adjusts from there. 
    Also I think the thing that we have negotiated that would be most helpful in the expired contract scenario is the old land concept of an Estoppel Certificate. When the parties do finally settle everything the Estoppel Certificate is intended to fill the gap period and put to rest the period where there was no agreement. Some similar document could be tailored to fit most contract situations I believe.

  3. We do this in my office occasionally. Usually it is a case of a contract expiring before we’ve finished completing the services under the contract. We then draft an amendment, with an amendment effective date prior to the expiration date. The amendment references the agreement, provides for a new termination date, and then reaffirms the agreement. Signatures are w/ the current date.

    I don’t think that is an ideal situation, and I’ve raised concerns about the practice before. In my research I recall coming across decisions saying that would not revive the contract, but none for my jurisdiction. 

  4. What if, instead of engaging in backdating or describing the agreement as a retroactive extension, the parties state that they intend to take on the same obligations as to the events that occurred in the gap period that they would have had if the contract had still been in effect. In the absence of a specific contrary law, applying price terms, risk-shifting terms, and other terms to facts that have already occurred (and might or might not be known) does not seem problematic in and of itself; settlement agreements do that all the time.

  5. I have a question please. I am dealing with a distribution contract where the manufacturer served the distributor a termination notice. Before the expiry of the contract, The parties came to the agreement that they would like to renew the contract for a fixed period. What would be your recommendation in this case? I would really appreciate your advice. Thanks

  6. A contract should not be allowed to expire.
    A simple amendment extending the expiration date or term of the agreement should always be favored.
    Keep better records and use a system to send automated reminders that a contract is set to expire. IMO


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