5 Tips for Contract Amendments
Contracts are generally considered rigid, consequence-imposing agreements that require stringent compliance. Although it is true that contracts create a legally binding obligation to perform in a certain manner, they do not have to be written in a completely inflexible fashion. The key to making changes to a contract that will not create unnecessary issues is to go about it in the proper manner. In general, when the parties to an agreement wish to make a change to a term or clause as it exists in the contract, they should do so by negotiating and drafting an amendment. The creation of an amendment is just as important as the creation of the contract itself, as it is changing the nature of the original arrangement. Here are five things to consider when amending a contract:
Avoid Strikethroughs and Insertions
The quick and dirty way to amend a contract would be to take the final, signed agreement and strikethrough the language that is being changed and/or insert the language needed to reflect the desired change. This method may be suitable for a very simple, rather short contract when a minor detail is being changed, but this will not suffice for more complicated agreements. For the most part, this method of amendment should be avoided, as it tends to make it hard to read the contract and renders the changes subject to incompatible interpretations. Granted, using strikethroughs and insertions is now possible via a computer, but it still creates a high likelihood that it will be difficult to make sense of the amended section with various deleted and inserted parts present.
Draft an Actual Document Entitled “Amendment”
In lieu of using the foregoing method of amending a contract, it is best for the parties to draft a coherent document that will reflect the changes being made. This document should obviously be entitled “Amendment,” and it should be abundantly clear which contract it is amending. The process of creating an amendment is much like the process of establishing the initial agreement, as the parties must agree upon the changes to be made, especially the language that will be used to clarify those changes.
Clarify the Contract Section Being Revised
A well-written contract is usually organized with sections, subsections, paragraphs, and subparagraphs, which are normally labeled by roman numerals, letters, and/or numbers. The more detailed a contract outline is, the easier it is to reference and locate different contract provisions, thereby facilitating the amendment process. For example, a main section may have both an upper case roman numeral and a title, then each subsection within that section will have an upper case letter and a title, with those subsections broken down into paragraphs as reflected by lower case roman numerals, followed by subparagraphs designated by lower case letters. Thus, a particular part of a contract may be referred to as “section II, subsection D, paragraph iii, subparagraph e.” This level of specificity helps ensure that the appropriate section is clearly identified, which is particularly important when the section is going to be revised with an amendment.
Be Very Specific
In addition to detailing the exact section that is subject to the revision, it is of the utmost importance for the amended language to be very specific. If a sentence is being revised, the exact sentence should be identified and the amendment should reflect the new sentence in its entirety. It is usually far too confusing to say that this word or that word is to be eliminated and replaced with some other word. Instead, the amendment should recite the complete sentence that is being changed, followed by something along the lines of “is hereby replaced with” and then the rewritten sentence. For example, for an amendment relating to a change in the delivery schedule, it would be important to write that the sentence in section III, subsection C, paragraph iv, subparagraph d, which reads as “Each shipment will be delivered on the fifteenth day of the month” is hereby replaced with “Each shipment will be delivered on the twentieth day of the month.” By specifying the exaction section as well as the exact language and writing out the new version in its entirety, there is no room for interpretation or error.
Sign and Initial
Obviously, the parties must agree to the final version of the proposed amendment, sign the agreed upon amendment to formally put it into effect, disseminate the finalized document to all parties, and append it to the actual contract. As previously mentioned, this is essentially identical to the formalization of the contract itself, and must be repeated for amendments to ensure proper execution.