Change of circumstances is a term used in law to refer to a situation where something has changed in a person’s life and as a result they need to modify their existing legal agreement or contract. Common changes that can prompt a change of circumstances include a life event, such as birth of a child, marriage or divorce, or a change in income, assets, or liabilities, such as a job loss or increase in debts.
Change of circumstances falls under the category of contract law. When an individual or business chooses to enter into a contract, it is not expected that the underlying circumstances will suddenly change. This means that any resulting modification to the original agreement must be mutually agreed upon by both parties.
Most contracts contain clauses outlining how and when changes to the agreement can be made. In the absence of such language or in the event of insufficient language, the law of contract will provide guidance to determine the parties’ legal rights and responsibilities.
Change of circumstances may also be taken into account when working to resolve a dispute. If one or more of the relevant facts or circumstances has changed, this may mean that the original terms and conditions of the contract will no longer apply. The parties to the dispute must therefore take this same change of circumstances into consideration before any resolution is reached.
In business, it is important to understand and plan for the possibility of a change of circumstances. An ounce of prevention is usually worth a pound of cure, and a well-thought-out contract with an effective change of circumstances clause is the best way to ensure that both parties are prepared in case something unexpected arises.