Contract Amendments Procedures: Everything You Need Know
Contract amendments procedures are set forth by the Code of Federal Regulations (CFR) §1753.11.3 min read
2. Entire Agreement and Amendments Effect
3. Effects of Consent or Waivers vs. Amendments
Contract amendments procedures are set forth by the Code of Federal Regulations (CFR) §1753.11. An amendment doesn't replace an entire original contract. Instead, amendments revise and add clauses to the original agreement.
Contracts that need extensive changes should be completely rewritten. However, you can also create an amendment and restatement, which is an agreement that the prior contract has replicated with the new changes included.
Contract Amendments Under CFR §1753.11
The RUS, or Rural Utilities Service, must approve a contract amendment if:
- The amendment will alter the contract's terms and conditions.
- The amendment will change the project scope of the contract, regardless of the contract amount before amendment.
- The amendment will increase the contract's payable amount by 20 percent or more.
- The amendment requires a contractor's performance bond on an unbonded contract.
Under CFR §1753.11, you are not required to obtain RUS approval for other types of contract amendments. These amendments can be submitted to the RUS any time prior to the closeout. Borrowers who wish to receive an advance based on an amended contract amount can ask for an increase in the approved amount. They must submit three copies of the amendment for approval to the RUS.
The borrower needs to make sure that:
- The contractor's bond will cover any additional work performed. If this amendment on its own, or combined with prior amendments, will increase the original contract price by 20 percent or more, then you are required to obtain a bond extension. This will bring the bond's penal sum to the final amended contract price.
- If the amendments cover any construction to be completed in a state or county that was not part of the original contract, the contractor and borrower are licensed to conduct business in that location.
- If the execution of any amendment causes the amended contract to exceed the original total by 20 percent or more, you submit three copies of the amendment to the RUS approval.
Entire Agreement and Amendments Effect
The entire agreement outlines everything between the involved parties. It will replace and supersede any oral and other written agreements. Modifications and amendments to the entire agreement will be only enforceable if they are written down and contain signatures from each party's authorized representative.
There may be times when this modifications requirement is not enforced. This may be because parties in a contract cannot strip themselves of the power to change or end a contract by a later agreement. Therefore, a written contract can be modified by the people or businesses as they desire. Essentially, forcing parties to only use written amendments will not always be enforced.
Don't necessarily disregard or avoid using a clause that requires written modifications and prohibits oral amendments in agreements. Written amendments offer many advantages versus oral agreements. For example, defending an oral amendment in court is particularly challenging. Some state laws require different types of amendments be in writing, like ones for real or intangible property transfers, or certain financial contracts.
Effects of Consent or Waivers vs. Amendments
There may be situations where parties need to deviate from the agreement, but don't need to necessarily modify it. This may be when one party in a non-disclosure contract might give permission to allow certain facts to be disclosed. This is technically a violation per the contract language and may be considered an amendment, but they are more properly known as a waiver or consent. Consents and waivers don't modify the agreement itself, unlike an amendment. Instead, it permits or excuses activities that would normally be prohibited by the contract. Any waivers and consents should be done in writing.
Contract amendments should be as concise and specific as possible. It can be informal or can resemble the original contract. One option is to use redlines and strikethroughs so that any additions and deletions are visible. There is usually an accompanying statement that described the revision process used.
For example, such a statement may read, “The parties agree to an amendment of this agreement with the following additions, which are denoted by underlines, and deletions, denoted by strikethroughs.” The statement may also say, “Section X is replaced in its entirety by the following text…”
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