Why contract terms drift over time

4 min read

Nobody decides to ignore a contract. Billing drifts away from it one small change at a time. A rate is updated by hand, a service is added by phone, a renewal rolls over. Years later the invoice and the agreement describe two different arrangements.

What drift looks like

Drift is the gap between what a contract says and what actually happens. It can run in either direction. Sometimes you are charged more than you agreed. Sometimes you receive less service than you pay for. And sometimes the contract is out of date and the real arrangement is better, but nobody has written it down.

The usual causes

  • Automatic renewals. A contract rolls into a new term, perhaps at a different price or service level. One legal commentary warns that missing a notice deadline by days can lock a business into outdated terms.
  • Verbal changes. An account manager agrees to an extra service on a call. No amendment is signed, and the charge appears on the next invoice.
  • Rate table updates. The vendor changes prices in its system. Your invoice reflects the new price, but your contract does not.
  • Staff turnover. The person who negotiated the deal leaves, and the contract file goes with them.
  • Scope changes. The way a service is delivered changes, but the contract wording stays vague about what is included.
  • System migrations. Moving to a new accounting system can drop vendor terms, tax settings or credit balances.
  • Escalators. Annual increases apply on schedule, but nobody checks they apply at the agreed rate. See escalation clause.

Where drift hides in leases

Leases drift too. Pass-through charges, annual adjustments and year-end reconciliations all depend on formulas written in the lease. When a landlord's billing practice changes, the formula may no longer be followed. A lease audit and compliance review compares the lease text with what was billed. The glossary entry on true-up explains one adjustment that often goes unchecked.

A drift check you can run yourself

Pick one important vendor and follow these steps.

  1. Find the signed contract and every amendment, schedule and side letter.
  2. Write down the price, the term, the renewal rule and the notice period.
  3. Pull the last three invoices.
  4. Compare each line item with the contract. Mark anything you cannot match.
  5. Ask the person who works with the vendor why each unmatched item is there.
  6. Note the answer, and whether a document supports it.

The aim is to separate three kinds of difference: those with a written reason, those with a verbal reason, and those with no reason anyone can give. The last group is the one to take further.

Sort the findings

For each difference you find, decide:

  • Is it a billing error to correct?
  • Is it a change you agreed to and should document?
  • Is it a term you should renegotiate?

Do not assume every difference is an error. Some are agreed changes that were never written down, and documenting them protects you.

When to call in outside help

If you have many vendors or a long history, a partner firm can do the matching at scale. The firm usually asks for the contract and amendments, a payment history by vendor and sampled invoices. See supplier contract compliance for what such a review covers. [CONFIRM: partner firm detail on review depth and sampling]

Note: Whether a charge breaches a contract can depend on how a clause is read. Your counsel should decide questions of interpretation. [VERIFY: how amendments by conduct or email are treated under your governing law]

Stop drift from restarting

Prevention takes little effort:

  • Keep a register of contracts with renewal date, notice period and an owner.
  • Set reminders well ahead of each notice date. One contract guide suggests starting about 90 days before the notice deadline for ordinary deals.
  • Save every amendment next to the original.
  • Ask account managers to confirm changes in writing.
  • Compare one invoice per vendor with the contract each quarter.

How often a full review makes sense is covered in how often to review your costs.

Next step

If you suspect drift across several vendors, choose a path on the request a professional page and a partner firm will contact you.

Find out what you are overpaying.

Tell us what you need reviewed. We match you by hand with an independent partner firm. You keep your existing vendors.

Request a professional

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