Contract Amendment vs Addendum: Everything You Need to Know
A contract amendment vs addendum are terms used when changing or adding to an original document. 3 min read
2. Creating an Amendment
Updated August 17, 2020:
A contract amendment vs addendum are terms used when changing or adding to an original document. An amendment makes changes to an already existing agreement whereas an addendum adds an additional document to the existing agreement.
Overview of Amendments vs Addendums
An amendment may be referred to as an alteration since it is altering the original document, which may include supplementary information. An example would be the parties involved agreeing to extend the original terms or change the price for a product. Both constitute a change to the original paperwork.
An addendum is informational or explanatory notes added to and made part of the existing contract once all parties involved have accepted it. Addendums are usually items that were left out when the contract was being drafted. An example would be the parties wanting to add more language to the original document, such as when a person buying a home has signed the contract but then decides to keep the appliances being offered with the home.
Amendments are allowed to be made by the persons who signed the original document. An addendum can be created by persons other than the ones who signed the original contract. Amendments are considered part of a contract until it is next negotiated, while an addendum is a legal and binding part of the contract.
Whenever an addendum is created, it is recommended to write above the signatures on the original contract, "This document is not valid without the attachment of Addendum X" (substitute the X with the corresponding letter, such as A, B, or C, or the number 1, 2, or 3, depending on the number of addendums you've added). Having an attachment alerts anyone looking at the original that there are other documents attached.
Written amendments have advantages over oral agreements. For example, the enforcement of an oral modification may be difficult. In some states, the law requires that certain types of amendments, such as financial contracts, be in writing. On the reverse side, even if a contract contains a clause requiring modifications to be in writing to be valid, they are not always enforced. Contracts may not be enforced even with a clause, but this doesn't mean oral amendments, requiring written modifications, or adding clauses should be prohibited.
Situations occur when the parties to an agreement want to deviate from the agreement but it does not need to be modified. This could happen when one party gives permission to another party to share information with other people even though the language in the contract prohibits this action. Granting permission or waiving a provision is sometimes considered an amendment, although it is more aptly defined as "consent" or a "waiver."
An amendment modifies the agreement, but a consent or waiver excuses or permits the action to take place even though the contract prohibits it. It is recommended that waivers and consents be put in writing.
Creating an Amendment
When creating an amendment, it is important that the language is clear, concise, and specific. The document can be in an informal format, such as a letter, or it can be created to resemble the format used in the original contract, including the same font and layout.
Three different styles are generally used when creating an amendment.
- Method #1: When using this method, any changes to the contract are shown visually using redlines and strikethroughs. For example, an addition is signified by an underline, and deleted text is crossed out using the strikethrough option in a word processing program. It is common practice to precede the amendment itself with a clarifying statement describing the process used to create/draft the amendment. The statement would note that additions would be indicated by an underline and that deletions would be indicated with a strikethrough, followed by the section being modified such as Section 7. Then, the amended information would be added.
- Method #2: If a clause is being completely replaced, simply state which clause is being replaced. Then, add the new clause in its place.
- Method #3: With this method, the portion of the amendment being changed is described. While this method is less time consuming, the parties need to verify the changes made to the existing contract. An example would be: "The date in the last sentence of the first paragraph is being modified from 'December 1' to 'April 1.'"
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