About Contract Amendments - How & Why Contracts Get Amended

A contract amendment is a change to an existing contract that all parties agree to. This article explains how they work when companies amend contracts and why.

Table of Contents
Published: 

August 24, 2021

Updated: 

December 19, 2023

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

In this article about contract amendments, we will cover:

• What are contract amendments, and how do 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, a contract amendment may be the best course of action. A contract amendment changes the original contract but does not replace it. In most cases, it substitutes a piece of the agreement to reflect a change in circumstances. Contract amendments can be as important as the contract itself, and an amendment that has been appropriately executed should be treated as part of the contract.

There are many reasons for contract amendments; without them, a party may be unable to fulfil the original agreement. When a relationship deviates from the original contract, the document should be amended accordingly to reflect the new practices of those involved.

Amendments can also be used when aspects of the contract need to be revised, limiting the parties' abilities to reach their agreed terms. In other situations, external forces outside of the business' control (such as a global pandemic) cause a need for contract amendments.

When Would You Amend a Contract?

Changes to a contract that has yet to be signed are not considered amendments. A contract amendment can only be implemented once all the parties have signed the document. Any changes to the contract before it has been signed will form part of the initial contract in the negotiation stage.

An amendment doesn't replace the original contract, just the part that requires the change, e.g., "the price paid for goods". If the changes to an agreement 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 latest changes (amendments) included.

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

Although contract amendments and addendums sound alike and can sometimes deliver similar results, these terms are very different and provide diverse 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 agree and sign the addendum, it 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 alterations that update the contract to reflect a change in circumstances. Sometimes a contract amendment can be as simple as replacing a specific clause.

What Is the Contract Amendment Process?

Contracts are legally binding agreements that bind two or more parties by 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 revision. We've included the critical stages of a contract amendment that can be applied to all business sectors.

1. Preparation

PreparationTo 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 agreement. 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 it to show they approve the 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 successful, it is best to follow guidelines when performing tasks. We've put together the following guidelines that encourage best practices 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.