Amending Contracts: Everything You Need to Know
Amending contracts is part of the contracting process and the step is as significant as the actual contract. For the involved parties to add forgotten clauses and provisions during the creation of a contract, amendments are done.3 min read
2. When a Contract Is Needed
3. Contract Addendum
4. When Is a Contract Addendum Used?
5. What Should a Contract Addendum Include?
Amending contracts is part of the contracting process and the step is as significant as the actual contract. For the involved parties to add forgotten clauses and provisions during the creation of a contract, amendments are done. When properly implemented, amendments will be enclosed with the contract and will be treated as part of the original document. For an amendment to be valid, there should be a contract. When a contract already exists and one of the parties wants to modify, add, delete, or correct some of the contract's elements, then the amendment is the best solution.
An amendment doesn't necessarily replace the entire contract but only on the part modified by the amendment. If the contract needs extensive revisions, then it is best to create a new agreement or an "amendment and restatement" where the prior contract is reproduced with the corresponding sections that were changed.
Why a Contract Is Needed
Contracts can either be oral or written. Most of the time, if people mention "contract", this would refer to a legal document while an oral contract is usually referred to an "agreement". An oral contract is actually as enforceable as a written contract, but it is a bit difficult to prove because evidence relies only on upon word of mouth as opposed to textual evidence.
Here are several reasons for the importance of a contract:
- Each party's rights and obligations are provided and described. One of the vital parts of the contract is the section where it states what both parties should be performing under the agreement. This should detail the responsibilities of each party to avoid confusion and future disputes.
- Deadlines and time frames. This part of the contract describes the delivery of the works as well as the completion of the project.
- Recourse if a problem arises. If one of the parties failed to deliver their obligations under the agreement, there should be information in the contract stating the possible steps to discontinue the relations if ever a problem arises.
- Compensation and responsibilities. Since a contract serves a binding agreement between two parties, it should also indicate the compensation a party (or parties) will get upon completion of the project. The contract can be used to file a lawsuit to compel payment if ever the paying party fails to do so.
- Decreases costs related to dispute or litigation. The contact might include clauses that might deal with conflict resolution. It can be mediation or arbitration and other alternative dispute resolutions (ADR).
When a Contract Is Needed
When building a relationship either business or personal, having a contract is a good idea. Here are instances when you should have a contract:
- You're building a partnership and need an agreement to bind you and your partner.
- You're employing workers who need to commit to a confidentiality agreement or non-disclosure agreement.
- You're engaging in ongoing or long-term sales or a purchase agreement with another individual or party.
- You are required to arrange services to develop or render a product.
- You have customers that need to agree to some conditions and terms when buying your products or availing your services.
- You're renting your property to an individual or business.
A document used to alter one or more sections of a contract is called a contract addendum. It is a separate document added to the original deal without invalidating it.
When Is a Contract Addendum Used?
A contract addendum is only used when there are minimal changes to an agreement or contract. Most of the time, the document clarifies the terms and condition when it's not working out as planned and necessary adjustments are needed like date changes, etc. Here are other reasons to use a contract addendum:
- A major addition to a job description of an employment contract.
- To move a due date, especially when hiring an independent contractor who's unable to deliver work by a certain date.
- Changes to a lease agreement when the lessor can't perform necessary obligations like payments of utilities, etc.
It is good to take note that if you have a lot of changes to a contract, then it might be better to create a new one.
What Should a Contract Addendum Include?
Like any other document, the contract addendum has basic elements including:
- The legal names of the involved parties in the contract relationship.
- Following the same text formatting like font type, size, and spacing of the original contract.
- The date of the contract addendum to be signed by both parties.
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