About Contract Amendments - How & Why Contracts Get Amended

To amend a contract is to delete from, make changes to, correct, or add to an existing contract after it is signed.

In this article about contract amendments, we will cover:

• What contract amendments are and how they differ from contract addendums

• Why a business could need a contract amendment

• When contract amendments are used

• The contract amendment process and best practices

What Are Contract Amendments?

Contracts play a vital role in everyday life. They form relationships; without them, no one would be inclined to reach their obligations.

A contract amendment is a process and result of deleting from, making changes to, correcting, or adding to an existing contract after it has been signed.

Most businesses will enter many contracts and once when they do, they and the other party are bound by the terms and conditions. Sometimes, however, situations can change, and one or more parties may require the contract to be amended to reflect their change in circumstances.

Why Would You Amend a Contract?

When a situation requires more than a one-time waiver, the best course of action may be a contract amendment. A contract amendment changes the original contract but does not replace it. In most cases, it substitutes a piece of the contract to reflect a change in circumstances. Sometimes, contract amendments can be just as important as the contract itself, and an amendment that has been executed properly should be treated as part of the contract.

There many reasons for contract amendments; without them, a party may not be able to fulfil the original agreement. When a relationship deviates from the original agreement, the contract should be amended accordingly to reflect the new practices of those involved.

Amendments can also be used when aspects of the contract do not appear to be working as planned, limiting the parties’ abilities to reach their agreed terms. In other situations, external forces outside of the business' control that cause a need for contract amendments, such as COVID-19. For example, during the pandemic, many service-based industries had staff who were isolating, preventing them from meeting their minimum agreement.

When Would You Amend a Contract?

Any changes to a contract that have not been signed are not classed as an amendment. A contract amendment takes place once the contract has been signed by all the parties and they are then bound by the terms and conditions.

Any changes to the contract before it has been signed will form part of the initial contract, as it falls into the negotiation stage.

An amendment to a contract doesn’t replace the original contract, just the part that requires the change, e.g., “the price paid for goods”. If the changes to a contract are extensive, it may be more suitable to draw up a new contract entirely. Alternatively, a party may wish to create an “amendment and restatement”, an agreement where the previous contract is produced with the new changes (amendments) included.

What’s the Difference Between Contract Addendums and Contract Amendments?

Although contract amendments and contract addendums sound alike, and they can sometimes deliver similar results, it’s important to know that these two terms are not the same and deliver different outcomes.

A contract addendum is an attachment to an original contract that modifies the terms and conditions. An addendum is used to edit, refine, or invalidate a portion of the original document. In most cases, it adds something new to the existing agreement. Once the parties involved agree and sign the addendum, it then becomes part of the updated contract.

On the other hand, a contract amendment is the process of making changes to an existing contract. This practice involves making alterations that update the contract to reflect a change in circumstances. Sometimes a contract amendment can be as simple as making changes to the original terms and conditions of an agreement by replacing a specific clause of the agreement.

What Is the Contract Amendment Process?

Contracts are legally binding agreements that bind two or more parties by a set of terms and conditions. Typically, they are complex and can go on for pages and pages. However, contract amendments are somewhat straightforward.

A written contract can be amended in minutes, on the condition that both parties agree and are present to sign, and if the contract specifies the terms of their emendation. We’ve included the key stages of a contract amendment that can be applied to all business sectors.

1. Preparation

To amend a contract, you first need to examine the existing version. Usually, there will be a clause that states how the involved parties may amend the current contract. The clause may look something like this:

This contract may be revised, added to or altered with mutual consent of the parties, providing written evidence is provided.

2. Drafting

Now that you have established how the contract can be amended, the second stage of the process involves drafting the necessary changes.

For minor changes, the party amending the contract can redline the provisions and handwrite the changes. Then, each party must initial and date beside every alteration to consent to their approval.

For significant changes, the involved parties may create a new document to define the sections to be modified, portions to be struck, definitions to be updated, and new clauses to be added. The contract must be dated with today’s date and the date and title of the original agreement.  

3. Approval

Once the contract amendment is drafted, the parties will sign the contract to show their approval of changes.

4. Execution

The parties involved are now legally bound by the terms and conditions of the amended contract.

Best Practices for Contract Amendments

Like any project process, if the outcome is going to be successful, it is best to follow guidelines when performing tasks. We’ve put together the following guidelines that encourage best practice when creating a contract amendment:

• Make sure the parties involved sign and date the amendment, or it won’t be legally enforceable.

• Attach any amendment to the original version of the contract.

• Be sure to reference the amendment's title, date, parties, and signature date.

• Don’t amend previous amendments or make multiple amendments. If so, writing a new contract to reflect the terms more clearly is the best approach.

• Always make sure you put contract amendments in writing.

And that’s Summize’s ultimate guide to contract amendments!

Did you find it useful? Or perhaps there’s something we missed? Get in touch with us at [email protected] to let us know.