Many times, it’s necessary for businesses to revise their original contracts and add a contract amendment.
When your business signs a contract with another party, you become bound by the terms of the contract and are legally required to fulfill them. However, the business environment can change, and contracts might require updates or additional terms. To change the original contract, you need to create a contract amendment.
As the legal representative of every documentation, how do you make changes to an already signed agreement? What’s the best way to do a contract amendment? Do you need to create a new contract after renegotiation?
In this post, let’s dig into the process of amending agreements — when it’s necessary to make them and what are the ways of doing them.
Ready to proceed? Let’s start!
What is a contract amendment?
A contract amendment is a modification (usually a correction, rewording, or removal) to an existing contract. It’s a legally binding change as long as both parties accept and sign the revisions. An amendment to a contract is typically subject to the same approval process as the original agreement.
Amending an existing contract can be made in writing or orally. But it’s always recommended to have a written document of any contract changes. This is to avoid legal disputes, as some agreements contain a no-oral modification clause.
You can use amendments to:
- extend the contract period for an additional duration;
- change the price of goods or services;
- add or remove provisions;
- change a project scope;
- change the compensation amount.
When to use a contract amendment?
Amendments to agreements are typically necessary after circumstances have changed since the original contract was signed — and that warrants a revision to the contract terms.
Here are some specific situations where a contract amendment is necessary:
- A newly enacted law impacts the terms of the contract, so an amendment may be necessary to ensure that the contract complies with the new legislation.
- In case one party to a contract unexpectedly ceases to exist (like death, bankruptcy, or change in the business name), an amendment may be required to identify the new party and renegotiate something that works better for both parties.
- There’s a need to renew the contract. Whenever a contract is renewed, amendments can extend the term of the contract.
- If there’s a significant change to the contract, such as adding a new clause, an amendment may be necessary.
The difference between a contract amendment and an addendum
When two parties in a contract find that some terms need change or clarification, they can either amend the existing contract or create an addendum.
Let’s explain contract amendment vs. addendum.
A contract amendment is when you alter an agreement, typically due to small changes to contracts, such as adjusting the date or location of an event.
Whereas an addendum is an entirely new document attached to the original contract. A good example is adding a non-disclosure agreement (NDA) to a service contract.
How to amend a contract?
While most contracts proceed without issue, it’s still best to know how to do contract amendments legally.
There are two ways in amending agreements — the amendment process using MS Word or using a contract lifecycle management tool. Let’s see how to amend a contract using both solutions.
Contract amendment process in Word
First, open the original contract document in Word. It’s a wise idea to make a copy of the document and save it as a new file.
The process of amending a contract starts with a discussion between the parties. To identify the changes that need to be made. Go through the document and highlight the parts you wish to change, leaving a comment on the new content.
In a separate file, document all the necessary changes made. Likely include the following:
- The date of the original contract. Then everyone involved knows which version of the contract is currently in effect;
- A description of the changes you want to make;
- The date of the amendment.
Once you’re finished with the amendments, make sure to include a statement informing the parties that the amendment supersedes all previous versions of the contract.
If you’re done, save the document and send it to the other party or parties for review. This amendment should be signed and attached to the original contract for reference
Contract amendment process in Avokaado
As mentioned earlier, any amending of a contract requires the same review and approval process as the original contract — usually 4-6 weeks. However, contract lifecycle management software such as Avokaado can speed up contract approval by 82%.
Let’s now use Avokaado CLM as we go through two scenarios: a contract before it has been signed and a post-signature.
Option 1: How to make amendments to a contract before signing?
This is easy. You can go through the automated contract workflows like you normally would in Avokaado.
Here are the useful features of the platform if you need to revise the contract:
- Discussion section
Be transparent as to why you propose changing a contract term. You can use Avokaado’s discussion section to add comments to the document so that other team members know why you made the particular contract amendment.
With Avokaado, you can alert your collaborators based on document status(draft, approval, or signing) of what actions they need to take.
- If you’re in draft status, you can use the “Notify” functionality, so the viewer/editor to notify them of their role.
- If in either approval or signing status, you can notify all collaborators who haven’t yet completed their task by clicking on “Notify undone.”
- Activity log
To ensure contract traceability, Avokaado lets you view each collaborator’s actions. You can download the activity log for a detailed overview of the document workflow activities — with dates and times. It’ll be a PDF version, so you can readily review or even share it.
- Adding editors
If you need extra reviews or amendments, add stakeholders as an editor. That will allow them to suggest or make direct contract changes. As editors, they can access the generated questionnaire and answer the questions relevant to their role in the document.
A collaborator like a stakeholder can be granted approver rights. This gives them full involvement in internal contract negotiation before it gets out. This is an automated workflow but isn’t set in stone. So if you need to cancel sent-out approvals, you can. Take note only that this will cancel the full contract approval flow.
Option 2: How to make amendments to a contract after signing?
We’ll be honest — ‘unsigning’ a signed contract is impossible. Contracts signed inside the Avokaado platform are already legally binding and thus enforceable.
However, this doesn’t mean that contract amendment isn’t possible after signing. In Avokaado, you can easily duplicate contracts. Even signed contracts are easy to replicate, and they’ll contain the original details too.
Here’s how to duplicate a signed contract in Avokaado:
- Go to documents view. There, documents are sorted according to their status.
- Click on the three dots across the document and select ‘Duplicate’. You will notice that the new copy goes to drafting status.
- Click the green icon to edit the document.
- The questionnaire will pop up again for you to modify the original contract details with your agreed amendments.
- Save the duplicate as a new version.
Yes, it requires you to go through the entire automated contract workflow, but that’s more efficient than writing a new contract on MS Word.
Though both processes seem pretty straightforward, you’ll see that MS Word isn’t really suitable for contract management — for amendments, you may miss adding some contract details or forget to update a specific clause.
A final note on contract amendments
Signing a contract is a big deal, but sometimes you need to make changes even after you sign it — a contract amendment is exactly that.
Whatever the reason for amending agreements, it’s important to ensure that you make all changes in writing. So that there’s a record of the revised agreement.
You have two choices in doing so:
- Make amendments using MS Word
- Or choose an efficient solution by using CLM software like Avokaado
If you want to try a solution that can make amending contracts easy, give Avokaado CLM a go. You can do all the necessary contract workflows automated in a single platform.