Contract Addendum and Contract Amendment

Contract Addendum VS Contract Amendment: What’s The Difference?

It’s not uncommon for contracts to need adjustments after they’re signed. If your company handles contracts on a regular basis, you will most likely have to make a contract amendment or addendum at some point in time. So, it’s essential to understand the difference between the two before you need to use either of them.

What is a contract amendment?

A contract amendment is a document that modifies an existing contract to improve, fix, or clarify anything in the original document. In other words, an amendment changes the current terms and conditions of an agreement by replacing a portion of it.

What is a contract addendum?

Technically, addendums are a form of an amendment, but they follow a different procedure. They add something new to the document rather than altering it. An amendment becomes a part of the new contract after all parties named in the contract agree to it.

Why do people confuse the difference between an addendum and an amendment to a contract?

Addendums and amendments seem similar, and they can yield similar results in some cases. However, it’s important to note that these contracting concepts are distinct and serve very different purposes. The main difference is that making amendments to a contract modifies its terms, but an addendum retains all of the previous contract provisions while adding new ones.

Contract addendum VS amendment

Both amendments and addenda are written after the initial contract has been signed, and both documents attempt to improve or expand the agreement between two parties. 

contract addendum

Here’s a rundown of the key distinctions between the two.

1. Purpose

Amendment

An amendment modifies a preexisting clause or multiple clauses in a contract. Consider amendments as changes to the original agreement (for example, extending a previously agreed-upon deadline).

Addendum

An addendum to a contract is a document attached to the original contract that outlines the additions that will be included in the contract. The initial contract is not altered or replaced by addendums.

2. Authority

Amendment

Only the signing parties or their legal representative can make amendments.

Addendum

Any party can make addendums, including third parties like title companies, etc.

3. Process

Amendment

An amendment is usually made by redlining the initial contract and making changes to its original provisions rather than adding new ones. When amending an existing contract, you can cross out any text that no longer applies, then have both parties sign off on the changes.

Addendum

An addendum is a document that is attached to an existing contract without changing the original language. Both parties must sign the addendum document to be legally binding. Additionally, a statement saying “This document is void without Addendum A” (B, C, etc.) should be attached to the original contract.

4. Usage

Amendment

Amendments are made when the parties want to modify a few of the terms and conditions of an existing agreement. They are commonly used in instances where external forces, such as changes in costs or increased regulation, may impact the contract.

amendements

Some common uses of contract amendment include:

  • Price fluctuations
  • Changes in demand
  • Adjusting the closing date
  • Occurrence of unforeseen circumstances
  • Difference in enforceability 

Addendum

When the parties desire to add terms and conditions to the contract that were not included when it was first created, they usually make an addendum rather than an amendment.

Some common examples of contract addendums include:

  • Sales contingencies
  • Loan assumptions
  • Disclosures
  • Back-up contract addendum
  • Partner additions

5. Enforceability

Amendment

Amendments are considered part of the formal contract after the parties negotiate and agree upon them. As a result, the parties can discuss and revise alterations before they become legally binding.

Addendum

An addendum is regarded as a part of the legal and binding document once it is attached. You must include the addendum if any changes are made and approved, or else they will remain invalid.

How to amend a contract before signing

Any change made before the contract is finalized is not technically an amendment. Before the parties sign the contract, you can revise the terms and have them recognized as part of the original deal. Minor adjustments, such as correcting typos, can also be made right before signing the contract.

contract before signing

Utilizing a contract management solution to manage the amendment and addendum workflow process effectively

During a contract’s lifecycle, changes or amendments are an imminent part and require proper management and monitoring. Contract management software automates contract amendments procedures and workflows, leaving no room for missed opportunities. Not only will it assist you with making the changes, but it will also keep track of all versions to eliminate confusion. By investing in an intelligent contract management system, your contract amendment process will be transparent, smart, and effective.

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