How To Legally Amend A Contract

In business (and any area of law), a written contract trumps any verbal promise, vow, handshake, or instructions scribbled on a sheet of paper. This is especially important to remember in commercial settings, where there are often a lot of moving parts and significant financial commitment on both sides. In this case, a written contract means one that is typed and signed by all parties involved to become valid.

Hindsight may be 20/20, but when you sign a contract, you can’t possibly predict all of the developments that will affect your agreement or your relationship in the future. That’s what amendments are for.

But if you think that you have properly revised your operating agreement, contract of sale, employment agreement, or any other contract you want to be absolutely sure that your revisions are valid and will hold water in court of law.

Many contracts specify the terms of their own emendation, but many others do not. Regardless, you should seek the advice of a lawyer before making any and all amendments official.

5 Steps to an Amended Contract

Here are the basic steps a business owner can expect when going through the contract amendment process. Remember that this won’t necessarily fit every situation, and you still need to seek the counsel of a professional before making anything official.

  1. Review the contract and see what it says about amendments.
  2. Discuss your proposed amendment with the other party or parties involved, or their attorneys if they’ve indicated so. Note that If the opposing party is represented by counsel, any communications to amend a contract should be through that attorney.
  3. Draft the amendment in the same manner as the original contract, specifying what section you are changing and the specific terms in as much detail as possible. You have the option of future-dating the amendment’s enforcability if both sides agree to it.
  4. At the end of the approved amendment, incorporate it into the original contract by stating what section/language it is replacing, as well as any other amended language in the original agreement. Then, affirm that the attached amendments are now a part of the contract as a whole.
  5. Have all parties sign and date the changes.

The Difference Between an Amendment and an Addendum

The terms “addendums” and “amendments” are commonly used in contract law, and the similarity of the two terms can confuse business owners. Basically, “amendment” means any alteration or revision of a an existing document.

An addendum, on the other hand, does not change the contract, it adds to it. An addendum is usually added to an exiting contract only when something of crucial importance has been accidentally omitted from the original document.

As always, when in doubt, ask a lawyer for assistance. When it comes to contracts, it’s always better to err on the side of caution.

Commercial Contracts v. Non-Commercial Contracts

Finally, it’s important to take note that most business contracts operate under a slightly different set of rules than others. Contractual transactions that deal with goods and tangible objects (such as a purchase of a car) fall under the Uniform Commercial Code, or UCC. A contract that falls under UCC governance gives parties more wiggle room in changing certain aspects of the agreement, to allow the production and sale of goods without the roadblocks they would face otherwise.

Most small businesses won’t face UCC contracts, but it’s an important distinction that could have a big impact on a business.

Disclaimer – The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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