Quick Contract Tips #4: How do I amend a contract half way through?
Q: What events trigger a contract amendment?
When the daily operations of business with your business counterparty deviates from what you originally agreed to with them in the contract, I recommend that you think about amending your contract to reflect the actual practice. An example is where you extend the term of the contract (say, from 1 year to 3 years) where, due to wishing to continue the good working relationship or if the project has extended beyond term. Another example is where the cost of materials will increase or there is a change to the delivery schedule, or the price of a product goes up or down due to a reduction or increase in the quantity of products ordered. An amendment may also become necessary due to a change in laws or rules in a regulated industry.
Q: What are the first steps in the contract amendment process?
The first thing to do is to pull out the contract and check what it says about the requirements to amend the contract. Typically it will state that the modification must be in writing, and agreed to by you and the counterparty. Double-check that the contract has not expired, which can happen if your contract term does not roll over automatically. If the contract has expired you can enter into a new contract or agree to extend the term in writing.
Q Can I amend the contract using email?
Yes, this is possible if you receive confirmation from your business counterpart so that you have clear agreement to the change(s). It is critical to preserve the relevant emails to evidence the amendment. Conversely, take care not to inadvertently agree to new conditions by email by stating clearly in the email that all communications are non-binding until you both sign a formal amendment agreement.
Q. What other ways can I amend a contract?
There is no specific requirement that the modification take any precise form and contract amendments do not have to mimic the format/layout of the original contract. The simplest way is amending by Letter or Memorandum (MOU). I recommend this for businesses keeping track of costs and who want things done clean and smoothly. Other ways to amend contacts are “Redlines” or “Strikethroughs”, replacing an entire section with an alteration or describing the amendment in a separate document. You can choose any method which suits the situation and relationship. The important things are that your intentions are clear, that you change any cross-references, date and sign the amendment with both of you keeping a copy of the letter, MOU, or emails.
Disclaimer: The contents above are for informational purposes only and do not create an attorney-client relationship. If you have specific questions, contact a lawyer for advice.
To design or review amendments to your contracts contact me at firstname.lastname@example.org.