Tips for Contract Amendments
The only constant in life changes. Situations are ever-changing and we, as individuals and businesses, need to learn to adapt to the circumstances. When things don’t go as planned, there’s only one thing you can do: amend the contract.
There are several reasons why you would need to amend a contract. Perhaps the situation changed and one or both of the parties are no longer able to follow through with their obligations. Maybe the law changed, and in response to that, you need to add or remove a clause. Finally, people make mistakes. Even when you rely on document review software for law firms, mistakes are possible. You can always go back to the contract and correct those mistakes.
Though contract amendments are common, they are not always easy to deal with. There are some best practices you can follow to help you avoid complications and amend your contract with ease. Here are 5 tips you can use when you’re preparing for a contract amendment.
Treat it Like a New Contract
Look back on the time when you signed the initial contract. Before you did that, you probably went through numerous drafts, made changes, and agreed on everything with the other party. Contract amendment is a similar process. The only difference is that you’re not working with a blank slate this time. You already have the basis of your contract, and you’re looking to add some changes to that.
Draft a new contract titled “Amendment”. Of course, if you’re only changing one clause, you don’t need to rewrite everything else from scratch. It’s easier to work with a new document because it allows you to keep track of all the changes and edits. When the edits are made, both parties can agree on the changes or renegotiate the terms until they reach a consensus.
Determine the Section That is Being Amended
You’re probably not changing the whole contract, but only revising one or a few sections. If your contract has a clear outline, you can simply identify the sections that need revising. Write them out down to the paragraphs. That will tell you exactly which things you need to focus on. You won’t be stuck reading and rereading the whole contract multiple times just because you’re not sure where the clause starts and ends.
Knowing which section, you’re working with also allows you to keep the rest of the contract untouched.
Decide How You’re Going to Document the Amendment
The easiest way to document the changes is to use the strike-through method. In this method, you put a line through whatever you’re changing (essentially crossing it out) and insert the new text. This method is very simple, though rarely useful. You should only resort to it if the contract is very short and/or the change you’re making is tiny. Unfortunately, this method will turn out to look very messy and confusing for contracts that are longer and more complex.
Another way to document the changes is by describing them. Once again, this is not a bad idea if you’re only dealing with a few small changes. However, it might prove annoying and unsightly for third parties dealing with the contract. The problem here is that the changes would be stated in a separate document that would make no sense without the actual contract. Likewise, the contract would not be up-to-date without the amendment.
The last option is the most time-consuming, but you’ll thank yourself in the end if that’s the one you choose. In this case, you record all the changes and rewrite the contract completely. Even though this requires the most effort, you’ll end up with a comprehensible document that replaces your original contact completely. There will be no disputes regarding what applies and what doesn’t. If you’re not sure what to go for, this method leads to the best outcome.
When you first signed the contract, you were probably warned about the importance of clear language. Who knows, maybe unclear language is what caused the need for this amendment in the first place. Either way, clear language in a contract is of the utmost importance. The same applies to this amendment. Be as specific as you can when rewriting the terms of the contract.
Vague phrasing can lead to misunderstandings in the future and even make the contract lose its binding powers. If you want to make it last, you should be as specific as you can. Leave no room for guessing and don’t let any reader misinterpret your words.
Check Your Jurisdiction
An amendment is usually treated as an addition to the contract or a contract itself. Depending on your jurisdiction, you will have to comply with certain laws and regulations. Check if there are any additional requirements you need to meet with your amendment.
In some situations, it might be easier for you to rewrite the contract completely or pass the amendment as a “Deed of Variation”. Depending on your country of residence, you might run into issues.
Whether or not you know how to amend a contract, you should get in touch with an experienced legal professional who will help you go through it. Making contract amendments is a relatively common procedure, but it’s still important to pay attention and do it right. This way, you won’t have to revise the contract shortly!
May 31, 2021