When negotiating a contract, or after a contract has been signed, you may want to modify, or change, the contract. For the most part, all parties to the contract have to agree to modifications. Read on to learn how to legally modify a contract before you sign it, as well as how to modify a contract after all the parties have signed it.
When to Amend a Contract
Before you deviate from the terms of the contract, it's important to first contact the other parties and officially amend the agreement. You shouldn't rely on written or verbal approval given outside the contract, as that won't prevent you from facing penalties for breaking (or "breaching") the agreement. Read on to find out how to make the agreed-upon changes to a contract.
Modifying a Contract Before Signing It
A contract is not legally binding until it is agreed to by all interested parties. For example, imagine you want to buy a car, but you do not like the price offered by the dealer. Even if the dealer signs the sales contract, the contract is not valid until you accept it (usually indicated by your signature). This seems obvious, but it is an important point: Contracts are not contracts until there is acceptance.
Before entering into a contract, you should carefully read it to ensure that you understand your obligations and the obligations of the other parties to the contract. If you do not understand it, or you have questions about the meaning of any sections of the contract, then have an attorney review and explain it to you.
Often, contracts may be biased toward one party, usually favoring the party who drafted it. If you did not write the contract, then you should take steps to eliminate these biases. Make a list of changes, or modifications, that you would like to see, and then discuss them with the other parties to the contract. As a result of this negotiation, you may be able to change the contract so the terms or conditions are more favorable to you.
Minor Modifications to a Contract
You can handwrite minor modifications to a contract onto the document. Clearly write the changes, and sign your initials next to each change, before signing the entire document. If the other party agrees to the changes, the other party will also initial the changes and sign the document.
Major Modifications to a Contract
For major modifications to a contract, first negotiate those changes with the other parties, then ask the person who originally drafted the document to print a modified version of the contract. All parties should review the reprinted document to ensure that the correct changes were made, then sign the newest version.
Modifying a Contract After Signing It
Once a contract has been signed, you typically cannot change it unless all parties to the contract agree to the modifications.
There are many reasons why you might want to modify a contract. Those would include:
- Extending it (for instance, lengthen a one-year contract by another six months);
- Shortening it (perhaps end the relationship a few months early);
- Changing the quantity of items that falls under the scope of the contract (such as increasing the number of goods);
- Adding additional scope to the contract (such as the types of goods to be delivered); or
- Changing the payment terms of the contract (for instance, allowing installment payments).
There may be instances where all parties to a contract are unable to come to an agreement on changes. If that happens, you'll have to either live with the original signed agreement, walk away from the contract (if it has not been signed), or calculate how much it will cost to break the contract and decide whether it is worth the cost.
Review the Contract for Rules on Modifications
Some written contracts may spell out how and when modifications to the contract can be made. For example, you might have signed a credit card agreement when applying for that card. The contract might say that the credit card issuer could change the interest rate at its discretion. By signing the initial contract, you have already given the credit card issuer the right to make future changes.
Or, for example, a sales contract with a vendor might state that all changes have to be agreed to, in writing, by the parties that signed the initial contract. In that case, you cannot call the vendor, ask for a price reduction, get verbal approval, and assume the vendor will follow through with the new pricing.
If the contract doesn't address the issue of changes, then you will need to talk to the other parties to the contract, make sure that they agree to the changes, and then, to be on the safe side, add a rider (additional section) to the contract that addresses the changes. This rider should be signed by each party to the original contract.
When to Use an Addendum
Another type of contract modification is an addendum. Instead of changing the terms of the agreement, an addendum adds new terms or conditions. You can also use an addendum to clarify ambiguous terms. For example, when the contract provides only the name of the city or town where a party will provide services, an addendum might list the exact location with the address.
An addendum becomes a part of the original contract and it will be governed by the terms of the original agreement; however, you typically do not have to sign the addendum (unless the contract specifies otherwise). For more information, read our article on how to effectively use addendums in your contracts.
Questions for Your Attorney
If you do not understand the language in a contract, need to better understand the obligations of a contract, or need help negotiating a contract, then an attorney will be able to assist you.
Among the questions to consider asking your lawyer:
- Do you have prior experience with contracts similar to this one?
- Are there sections of the contract that you'd suggest I change?
- Are there sections of the contract that are biased against me?
- What are the potential ramifications if we can't modify this contract?