Nothing lasts forever, including contractual agreements. As a business owner or party to a contract, it is important to be aware of the expiry dates set out in your agreements to ensure that your contract is en route to be settled by the specified date and that you are not blindsided at the point where it becomes invalid or terminated. This Business Kitz article will provide the ultimate guide to contract expiration dates, how to specify a date and when operations continue from a previous agreement, so that you can organise your work according to your time frame.
What is the expiration of a contract?
The expiration of a contract is the completion of a contract according to the fixed period of when the contract is operational. This may be the date of the contract’s initial period or a contract extension period. An expiration date is the end of when a contract is valid, or in other words, a contract expiring is an indication that the job has been completed. While most contracts have date driven expirations, they can also be expired based on the completion of an event. For example, a contractor may be given a window of time to provide a service, i.e fix a technical issue, and the agreement may specify its completion based on the completion of the service.
Generally before the end day of a contract, the business, stakeholders, or parties to the contract will have negotiated extended terms of the renewal of the contract, or whether the expiring position will remain terminated. ‘Termination’ and ‘expiration’ are both terms used by contract drafters to specify the end of an agreement, and whilst they may simply seem like synonyms, business owners should be cautiously aware of the way these are used to mitigate potential disputes due to miscommunication or ambiguity.
How do I specify a date?
There is no one size fits all set term; the length of your contract will generally depend on the terms set out in your agreement and will differ for the type of business being conducted. For example, temporary or contractual work will include more fast-paced business activities whereas long-term contracts will usually involve an ongoing service.
Under the Fair Work Act 2009 s.186(5), for the Fair Work Commission to approve an enterprise agreement it is required for a date to be specified as its nominal expiry date and is no longer than four years from the approved date by the Commission. Four truly is the magic number; making sure that your nominal expiry date does not extend this time is one sure-fire way to avoid legal issues. The two ways a nominal expiry date can be expressed are:
- Allocating a specific date as the nominal expiry date; or
- Specifying a timeframe from the approval date.
The tricky part of nominal expiry dates is that a business will not know what exact date the Commission will approve of the agreement and therefore cannot fully control its expiry end date.
Continued operations post-expiry date
All good things must come to an end, but sometimes they can continue. After their nominal expiry dates, agreements are still in operation until the Commission replaces or terminates them. Therefore, the parties will still need to abide by the provisions set out in the contract even after the expiry date, regardless of years passing.
Visibility of expiration dates: why is this important?
Being aware of your contract expiry date is vital for the smooth running of your operations, avoiding stress and risks to your business. Lack of visibility may result in risks of running out of time to perform duties or jobs, delays in business activities, failing to negotiate renewal or extension of the contract prior to expiry and not being able to give due notice to parties.
If you require assistance drafting your contracts or agreements Business Kitz has customisable templates and free customer support to make it easier for you! If you are unsure of contract expiry dates, whether your terms are legally binding or have a legal dispute, we recommend seeking legal advice through our sister company Legal Kitz. You can book a free 30-minute consultation with their experienced and highly qualified team via our website now.