Modification of Contract: Everything You Need to Know
A modification of contract is any change, in part or whole, occurring to a legally binding agreement between two or more parties. 3 min read
2. Why Are Contract Modifications Necessary?
3. When Can You Modify a Contract?
A modification of contract is any change, in part or whole, occurring to a legally binding agreement between two or more parties. Any contract can be modified before or after signing the agreement, but all parties must agree to the changes. If any party doesn't agree to the modification, the changes are invalid.
What Is a Contract Modification?
A contract is typically a written document outlining the benefits and duties of each party involved in the contract. Some contracts must be in writing to be legally binding, such as statute of frauds (SOF). Others may be oral agreements. Whether the contract is orally agreed upon or in writing, it may be modified as needed later.
Contract modification occurs when the individuals who entered into the agreement change the document's terms. All valid modifications are enforced and considered legally binding, but all parties must agree to the modifications.
Everyone enters into contracts at various times in their personal or business life. For example, you might sign an employment contract when getting a new job. When buying a home, there's a purchase contract to sign. Even a simple act like getting a new phone requires a contract. Some contracts are so routine that you may not even realize you're entering into a contractual agreement, such as when you sign a sales slip for a credit card purchase.
However, contracts are formal agreements, so there's a lot of negotiation that goes into them, especially business-related contracts. In these cases, it's best to have a lawyer review the agreement before signing it.
Contracts are governed by individual state law. For example, service contracts fall under state common law, so anytime you hire someone to work on your house, you're entering into a service contract. However, contracts for the sale of products fall under the state's Uniform Commercial Code, which differs from common law.
A contract modification is a mutually agreed upon change to the original contract. Its changes must fall under the scope of the changes clause and leave the agreement's original purpose and effect intact. When negotiating a contract, you can modify the agreement as needed so long as all parties agree. Bilateral changes may involve a supplemental agreement, an official document referred to as a modification of contract.
When all parties agree to the modification and get those changes in writing, the contract changes are enforceable in court. Oral modifications are generally not enforceable by law. In general, a contract modification should be in writing if the modification changes the value of the contract by $500 or more.
Why Are Contract Modifications Necessary?
Contract modifications occur for a number of reasons. Some common reasons you may want to modify an agreement are:
- Extending the contract duration
- Altering the items involved in the contract
- Adding or subtracting goods covered in the contract
- Changing payment terms
- Changing delivery terms
A contract may need to be changed for other reasons that go beyond the needs of the parties involved. For instance, a modification of contract might be necessary if a statutory requirement demands it or a judge deems a modification necessary.
When Can You Modify a Contract?
You can modify a contract at any time as long as all parties involved in the agreement consent to the changes. Minor modifications may be handwritten on the original document and then signed by all parties. Major changes, however, need to involve a contract renegotiation, reprinting, and resigning.
What's more, if an original contract contains instructions on how to make modifications, parties will need to adhere to these instructions.
Before modifying any contract, be sure to:
- Make a list of changes you feel are necessary and appropriate
- Note any contract provisions that seem unfair or unnecessary
- Note the date, time, and location when you chose to make modifications to the contract
- Try to predict how the changes might affect all parties' contract rights
It's easier to modify a contract before signing, so don't be afraid to negotiate your original contract terms. If any party has already begun performing their duties as outlined in the contract, it can be difficult to adjust the contract. In this case, be prepared to present your arguments for modifying the contract.
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