Written contracts play a vital role in both everyday life and in business. Without them, disputes would have to be decided by weighing one person’s word over another. Contract amendments are also often just as important as the contract itself. Amendments are used to add on forgotten provisions or address a need that became apparent after the contract began.
A properly executed amendment is attached to the contract and treated as part of the deal. Without adding an contract amendment, the practices that are actually occurring or those forgotten aspects of the original contract may not be enforceable if a dispute arises.
Of course, to have a valid amendment, you must first have a proper contract. As such, it is important to consider why you need a contract and how to create one.
Contracts can technically be either written or oral. Generally speaking, however, when someone refers to a “contract,” they usually mean a written document, while an oral contract is often referred to as an “agreement.” While an oral contract is often just as enforceable as a written contract, there are serious evidentiary issues if there is a dispute. It is much harder to prove what an oral contract contains because the evidence is usually based on “he said, she said.” Oral contracts are also simply not enforceable under the law for certain kinds of agreements, such as real estate purchase agreements or arrangements that are expected to last more than one year.
It is always best to err on the side of caution when creating a written contract. The written agreement should contain every single portion of your agreement, both big and small. A contract is important for several reasons:
Contracts are a good idea for virtually every relationship you have, whether it is in a business or personal setting. The following specific examples are instances that you should have a contract:
Contracts are useful for a variety of situations. When in doubt, it is better to use a written agreement.
There are two general types of contract breaches: minor and material breaches. A minor breach means that there has been a small deviation from the requirements of the contract. This kind of violation can usually be remedied, and some contracts include a certain amount of time in which the minor breach must be addressed. Generally, minor violations do not affect the most important portions of the contract, such as the price or when goods or services should be delivered.
A material breach, on the other hand, affects the vital aspects of the contract. There may be ways to fix the breach built into the contract, but a material breach is generally reason to void the contract completely.
The language in a contract is vital for contract enforcement. If the contract does not lay out the relationship between the parties properly, something that you thought was a breach may not be under the actual contract. In most circumstances, the contract is the “end all, be all” of the relationship.
The law presumes that every agreement between the parties is encompassed within the contract. This is sometimes referred to as the “four corners rule.” It also means that the evidence outside the contract is not admissible. This concept is known as the “parol evidence rule.” It essentially signifies that you cannot enter evidence that extends beyond the contract to show what the arrangement was really like. This can be a serious problem for those trying to enforce provisions of the contract that were agreed upon between the parties but were never incorporated into the contract.
Not every deviation from the specific language in a contract is considered a breach of contract. There are situations where the other party may “waive” certain provisions or where they may “consent” to specific non-material breaches. A party can waive certain terms of an agreement by their words or actions.
For example, if you breach the contract in a minor way, but the other party continues to do business with you regardless of the violation, then they may have “waived” that term of the agreement. The contract as a whole has not been voided, but that portion may not truly be “part” of the deal anymore.
In other situations, a party may consent to a limited breach. If, for example, you are running behind on a delivery, which would violate the terms of the contract, the other party may give you permission to tack on some extra time to make the delivery. This consent does not alter the terms of future deliveries, but it modifies the agreement slightly so that you do not breach the contract.
If the parties agree to a waiver or consent, it is a good idea to get it in writing in case a dispute arises in the future.
In situations that require more than just a limited waiver or consent, a contract amendment may be appropriate. When you amend a contract, you change the original contract in some way. This can include adding, deleting, or correcting portions of the contract. The contract amendment does not replace the entire contract, but often substitutes a part of it.
It is important that the modification is in writing so that it can be attached to the written agreement. Often, a contract will specifically state that any changes need to be made in writing, so it is imperative to be mindful of that type of language. Nonetheless, the requirement to put changes in writing is not always enforced in court. It is still a good idea regardless because it allows everyone to be on the same page about the specific terms of the amendment.
If extensive changes are required, it might be better to simply create a new contract that has language based on the existing agreement.
Any change that occurs before the contract has been fully executed (signed) is not technically an amendment. You can change the terms of the contract before the parties sign it and it will be considered part of the initial contract. You can also make simple changes like correcting typos just before the contract is signed. Just make the change in pen and be sure that each party initials it.
Any time the relationship deviates from the original contract, you should amend the contract to reflect the actual practices of the parties. You may also need to make a change if some provision of the contract does not appear to be working as planned. There are also situations where outside forces, such as prices of component parts or changes in regulations, may affect the contract.
It is a good rule of thumb to make an amendment any time the parties agree to a change. Getting the amendment in writing will be important to future contract enforcement.
Contract amendments do not have to be as formal as the original contract. Instead, an amendment can take the form of a letter or it can mimic the format and layout of the original contract. There is no specific requirement that the modification take any precise form.
There are three general types of contract amendments, and each one will usually be valid under the law as long as both parties agree to the change.
You can make changes directly on the contract by using a redline or strikethrough method. This is a more informal way to make changes to contracts, but it is normally effective. You simply cross out the language that no longer applies and re-write the language that should be applicable. Just be sure that each party initials or creates a written agreement that reflects that they approve the changes to avoid disputes down the road. The alteration should be dated as well.
You can use a separate document to lay out how you would like to change an entire section. You should note at the beginning of the document which part it is that is being altered and when it is effective. Again, both parties should sign or initial and date the amendment to show that both sides agreed to the change. Creating this separate section is usually the easiest way to amend your contract clearly, and it can avoid misinterpretations that are sometimes associated with the other two methods.
Instead of changing the whole section or using the strikethrough method, you can spell out exactly how a section should be modified. Describe which portions should be stricken and what should be added to the contract. This method is sometimes harder to read, but it is often considered the most formal.
You can choose any method you would like to amend a contract, but having a separate document that lays out exactly what you are changing is often the most efficient way. You can also use a combination of one or more methods.
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