Contract Amendment: Everything you need to know

A contract amendment is a mutually agreed change to an existing contract between parties. 

 

Learn everything you need to know below, including how to draft a contract amendment and learn the differences between contract amendments and contract addendums. 

 

When and why should you amend a contract?

 

One of the main purposes for making a contract is to establish and formalise a relationship by clearly defining the terms and obligations. In another word, a contract outlines the rights and responsibilities of each party,  ensures all parties understand what they are agreeing to avoid any misinterpretation. However, a contract needs to be amended where a business relationship between two parties no longer aligns with the initial contract or external factors that significantly affect the agreement. Additionally, there is no specific time or legal requirement regarding when you're able to amend a contract. It should therefore happen at any time when you or the other party wants to make changes to the terms of the contract.

 

Depending on the needs of the parties, below are some amendment examples: 

• Contract Duration - the length of time the contract will be in effect 
• Service or product pricing - this pertains to the fees or charges for the goods or services provided 
• Responsibilities and liabilities - the duties of one or both parties, adjusting the allocation of risk between them 
• Shipping or delivery times - involves specifying the expected time frames for shipping or delivery, and may include provision for extending or shortening these periods

How to amend a contract?

 

While writing contracts can be complex and lengthy, making amendments to a contract can be a relatively straightforward process. Specifically, if both parties agree to the proposed changes and are ready to sign, and if the contract itself includes provisions for amendments, then the process can be completed in just a few minutes. Here are the essential elements involved in amending a contract. 

 

Follow these guidelines when creating a contract amendment: 

 

Step 1: Determine the changes or Party

 

a) When writing a contract amendment, it is essential to determine the changes that need to be made and which party is requesting the amendment.

 

b) The amendment needs to clearly state the parties involved, the date of the original contract, and any other relevant details. Please see here for a contract amendment template.

 

Step 2: Notify the other party

 

a) It is essential to notify the other party about the proposed changes - communication can be made through various means, such as email, letter, or online meeting. This ensures that both parties are aware of the proposed changes, and it gives them an opportunity to review and make any necessary changes before signing the contract.

 

Step 3: Draft the language 

 

a) The language of the amendment should be clear and concise.

 

b) Avoiding overly complex language that may be difficult for non-lawyers to understand.

 

c) New or revised terms should be clearly defined and explained.

 

Step 4: Sign the Amendment

 

a) The contract should be signed between the parties to make it legally binding, indicating their agreement to the changes made, protects the parties against any disputes that may arise in the future. 

 

What is the difference between a contract amendment and a contract addendum 

 

Contract amendments and contract addendums are both used to make changes to an existing contract. However, there are some key differences between them. 

 

In contrast to an amendment, which alters the terms and conditions of a contract and is used when the parties want to make a substantive change to the agreement, such as a change in pricing or a change in the scope of work. An addendum typically adds or clarifies specific clauses within an existing agreement. It is usually used when the parties want to add something to the original contract, such as an additional service or product. For example, the termination of employment clause is one such provision that may require amendment via an addendum. To illustrate, consider an initial employment contract that only outlines the conditions for termination as being death or voluntary resignation. In this scenario, a company may later decide to modify this clause via an addendum to specify additional duties and exceptions for employees. This allows for greater clarity and specificity within the employment contract, and ensures that both parties are aware of the updated terms and conditions.

 

While both addendums and amendments can be used to make changes to a contract, it is important to use the appropriate one based on the nature of the changes that need to be made. Overall, understanding the differences between contract amendments and addendums is important in ensuring clarity and specificity within contractual agreements. 

 

Feature	Addendum	Agreement
Definition	A document that modifies or adds to an existing contract	A formal contract that establishes terms between two parties
Purpose	To make specific changes or additions to an existing contract	To create a new contract or formalise an understanding
Relationship	Connected to an existing contract	Standalone document
Scope	Limited to modifying specific terms or adding new terms	Comprehensive coverage of terms and conditions
Timing	Typically created after the original contract is in effect	Created as the primary document from the beginning
Legal Status	Part of the original contract and legally binding	Legally  binding and enforceable
Execution	Requires signatures of all parties involved	Requires signatures of all parties involved
Incorporation	Becomes part of the original contract	Stands alone as a separate contract
Amendments	May be subject to further addenda or amendments	May be subject to further amendments or addenda
Examples	Addendum to change the delivery date in a purchase agreement	Sales agreement between a buyer and a seller

 

Frequently Asked Questions 

 

1. Can an amendment override the original contract entirely? 

 

Yes, an amendment can override the original contract in its entirety. However, parties should carefully consider the implications and potential consequences of such a decision. Amending the entire contract may result in unintended complications and conflicts.

 

It is important to note that for an amendment to be valid, it requires the same level of execution and formalities as a contract. When substantial amendments are required, parties may consider executing a new contract instead of replacing or deleting provisions of the existing contract.

 

2. What happens if parties disagree on the proposed amendment? 

 

When parties disagree on a proposed amendment, it can render the amendment invalid and unenforceable.

 

3. Can amendments be made orally, or do they need to be in writing? 

 

In some cases, oral amendments to a contract may be recognized and enforced if there is sufficient evidence to prove the existence and terms of the oral agreement. For example, if both parties clearly and unequivocally agree to an oral amendment and conduct themselves accordingly, it may be possible to enforce the amendment. 

 

However, most commercial contracts typically contain a clause known as a "no oral modification" or "NOM" clause, which specifies that the contract may only be amended in writing and signed by the parties involved. The purpose of this clause is to prevent any informal or unintentional oral changes to the contract that may lead to misunderstandings or disputes. 

 

4. Can amendments be amended or revoked? 

 

Yes, contract amendments can be further amended or revoked, but the specific procedures and requirements for doing so may depend on the terms of the original contract and the nature of the amendment. To amend or revoke an existing amendment, parties typically need to follow a similar process as they did for the original amendment.