Changing Terms of Contract: Everything You Need to Know
Changing terms of contract must be handled in a specific way to maintain the legality of the terms of the agreement.3 min read
Amending an Existing Contract
A contract is an agreement between two or more parties that is legally binding. Most contracts are written documents, outlining the responsibilities and duties of each involved party, along with the benefits that each party will receive by entering into the agreement. Certain contracts are required by law to be in writing in order to be legally enforceable, such as any contract that is subject to the statute of frauds. Both oral and written contracts can usually be modified after all parties agree on the terms.
Most adults will enter into quite a few contracts throughout their lives, in both business and personal applications. Some contracts relate to major life events, such as:
- Purchasing a home
- Accepting a new job
- Purchasing or leasing a car
These types of contracts may involve negotiation between the parties and could require legal review before being signed as they are more formal in nature. In other circumstances, you may not even realize when you're signing contracts. For example, when you sign a receipt after charging something on a credit card, the signature on that receipt becomes your contractual agreement to pay for the services or goods.
Laws of Contract Amendment
State laws govern the requirements around contracts. State common laws usually govern service contracts, such as a contract for a professional to paint the interior walls of your home. The state in which you sign a contract for the sale of goods will have its own version of the Uniform Commercial Code, which will govern that type of contract.
Amendments don't replace the terms in the original contract. Instead, an amendment will modify a single portion of the contract. For example, if you needed to change the price for goods being purchased or the date the goods would be delivered, the amendment would only alter those specific details in the original contract.
When a contract needs major changes, it makes more sense to create a new agreement. You can also create a reproduction of the original contract with the revisions needed, which is called an amendment and restatement. The amendment and restatement include the entire agreement between all involved parties and will replace any previous agreements made, both orally and in writing.
Any amendments and modifications to this agreement are only enforceable if they have been produced in writing and have been signed by all involved parties or their authorized representatives. These amendments and modifications include details listed in the appendix or additional exhibits. Although modifications are legally required to be in writing, that regulation isn't enforced at all times.
According to one court, the reason that written modifications aren't always enforced is the fact that the involved parties can't deprive themselves of the opportunity or power to terminate or alter an original agreement by an agreement that comes later. Therefore, the parties involved can choose how they wish to modify their agreement. However, it is more difficult to enforce a contract modification that has been carried out orally. Oral amendments shouldn't be disregarded or prohibited. If you plan to make oral amendments to your contract, avoid using a clause that requires written amendments.
A written amendment does offer some advantages over an oral amendment. When a party is trying to enforce a modification that was made orally, the legal process will be more challenging, especially if the contract includes a clause that requires amendments to be made in writing.
Certain amendments are required to be written, according to state laws. Examples of these amendments include those related to:
- Transfers of real property
- Financial matters
- Transfers of intangible property
When a contract is amended prior to when the parties sign, the changes aren't called amendments. If a contract has already been produced but has an error, one of the parties may hand write a change on the document. As long as all involved parties initial next to the handwritten change, it will be considered a legally binding modification. This type of change isn't technically amending the contract, but it may be labeled as an amendment.
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