Contract Amendment

Unless the terms of the contract specifically prohibit modifications, virtually any type of legal agreement can be changed through a contract amendment.

Common types of contracts that can be amended by using a contract amendment include general partnership agreements, non-compete agreements, non-disclosure agreements, LLC operating agreements, sales contracts, and confidentiality agreements.

It is very common for parties to later agree to change the terms of an existing legal contract.

Sometimes, particularly in informal business arrangements where the parties have both a business relationship and a personal relationship, there is a tendency to assume that all of the parties understand the changed terms.

Unfortunately, situations and relationships can change over time. If the parties never updated the original contract using a contract amendment to reflect the changed terms, and now one of the parties is not upholding its contractual obligations, the other party will likely be fighting an uphill battle in court to try to enforce the agreement.

A contract amendment serves to provide written documentation of the changed terms. When handled well, contract amendments can actually help strengthen the relationship between the parties by providing clear and unambiguous terms to govern the agreement.

Parties to a contract may agree to execute a contract amendment at any time to change any of the underlying terms of a contract they previously executed.

One of the most common reasons for amending an existing contract is simply to extend the length of time that the contract will last. Another common reason to amend a contract is to change the reference to which state’s or jurisdiction’s laws will govern enforcement of the contract’s terms (generally referred to as the “Governing Law” provision).

Contract amendments may also be used to change payment or delivery terms, to change the quantity of goods or a description of services to be provided under the agreement, or for any other provision all parties agree should be changed.

An amendment is simply a change to an existing contract and generally does not replace the original document. After executing a contract amendment, the amendment should be maintained with the underlying agreement.

In certain circumstances, a contract amendment may completely restate the terms of the original contract; however, complete restatements and amendments are relatively rare. Most contract amendments change only certain terms or conditions of an existing contract, leaving the other provisions in place.

In order to be valid and legally enforceable, amendments to existing written contracts should be made in writing and should be signed by all of the parties to the original contract.

While some states accept oral contracts for certain types of agreements, having agreed-upon terms and provisions stated in writing is a good business practice.

Even if oral amendments to the contract are allowed by the terms of the original contract, it will be difficult to enforce later if one party does not uphold its end of the agreement.

Any person or business that has the legal authority to enter into a contract in the first place may later enter into a contract amendment to change the terms of the original contract.

An oral or written contract, or a subsequent amendment to an existing legal agreement, will not likely be valid or enforceable if it is entered into by a minor or by someone who lacks the mental capacity or legal standing to enter into the contract.

Most contract amendments require the agreement and signatures of all parties to the contract in order to be valid and enforceable.

Under certain limited circumstances, a unilateral amendment, or an amendment where just one party to the agreement makes an enforceable change, may be used. However, such situations are not very common. Examples of unilateral contracts include credit card agreements where the cardholder’s continued use of the card after receiving notice of an amendment constitutes his or her agreement to the changes, or software licensing agreements where the user’s continued use of the software is deemed acceptance of revised contract terms.

Most business agreements are bilateral contracts, meaning all parties to the agreement must agree to add to, delete, or change terms and provisions of the contract.

When contractual formalities have been met, and when all parties to the existing contract agree on the changes to be made, a contract amendment will generally be binding and enforceable in court.

However, if one of the parties does not agree to the terms, or if the terms of the contract amendment are not executed in good faith, the amendment will likely not be legally valid or binding on the parties.

While the terms “contract amendment” and “contract addendum” are often used interchangeably, they actually refer to different types of contractual changes.

A contract amendment is used when the parties want to modify the terms of an existing legal contract. For example, the parties may agree to extend the original term of the contract using an amendment, or they may change the agreed-upon price or quantity for goods and services governed by the contract. In contrast, a contract addendum may be used when all of the terms in the existing contract still apply, but the parties want to add language to the existing contract.

Although it is rare, if an existing contract includes language specifically stating that the terms of the contract may not be altered under any circumstances, then a contract amendment is not likely to be considered legally valid or enforceable. In that case, the parties would need to terminate the existing contract according to its terms and enter into a new legal contract.