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This article has been written by Vaishnavi Krupakaran, pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.com

Introduction

The one thing that is constant in all our life is change, there are many reasons why the contracts have to be changed, for example – sometimes we fill the need for extension of a contract, or sometimes when the quantity of work might need to be increased or there might be a change necessary because of statutory requirements. Sometimes a judge might also order the change in an agreement. Hence drafting the amendment clauses of an agreement plays an important role as much as drafting of the conditions of the amendment itself.

Amendment agreement 

An amendment agreement is a revised agreement or an addition to the original agreement. The change to the original agreement is called an amendment. The amendment is usually entered into by the parties instead of entering into a new fresh agreement. The change required in an agreement is substantial then it has to be changed but if the changes are easy and simple then amending the agreement is the best possible solution. The main details which have to be entered into an amendment agreement are clauses in a contract, details that have to be revised, the clause numbers that need to be revised, etc. The main function of the addendum is to modify, nullify change and clarify the terms of the contract.

Reasons for  people want to amend contracts 

People amend contracts due to the advancement in business and society there shall always be changes in the amendments in contract from time to time therefore amendments secure a special place in the contracts. For example, due to Covid-19  many employment and rental policies have been amended. An addendum is an efficient way to attach the updated terms and conditions of a contract.

Usage of such contracts 

As discussed, such contracts are used to amend the existing contracts. The amendment agreement needs to be signed by both the parties and has to be written in a stamp paper and the date has to be clearly mentioned . The price of the stamp paper would vary from state to state in India. The stamp paper value will be enlisted on the website. As a customary practice, it is important that all the parties sign on the stamp paper and distribute one copy of the stamp paper to each other.

Law applicable 

The main foundation   of law and reference of an amendment agreement is the Indian Contract Act, 1872. It covers the general principles, formations, and mutual understanding of the contract.

The general structure of  an amendment agreement 

Introductory paragraph 

The first para should contain the name of the partners and the name of the company, description of the amendment.

Definition 

The words used in the addendum contract shall be clearly defined before starting with the recitals. The definitions are very important as the same words can be used in different senses in different contexts. Hence definition and under which Act the word would be defined is different in every contract.

  1. Designated record set” means The group of records maintained by or for a covered entity that.

Consideration 

It is very important to revise and mention the consideration during the addendum as consideration is the main purpose of the contract, therefore it is very important to revisit consideration of an agreement.

Conclusion 

There should be a guarantee of enforcement of the amendment and shall be assigned with the contract, it shall remain written for safety.

Signature 

A signature is very important as it is used to mark acknowledgement of the person after reading the agreement. Usually, the person signs below the print of his title like CEO, principal, etc.

In a partnership amendment agreement, it’s essential only for the partners to sign but in the case of corporate or financial firms, other signatures are also required. Therefore the sign in every agreement whether a new or an amended one is very important for the enforcement of the contract. The most important part of signing is to proofread the agreement before signing the agreement for safety and precaution and to agree on mutual terms.

Managing of amendment 

Usually, a contract is subject to many amendments where every amendment should be numbered, for example, the amendment “number 1”, “amendment number 2.”

There are 4main types of agreements, while amending we should be very specific and concise the amendment should sound significant else it would resemble the original contract.

Therefore are broadheads under which the contracts amendments are classified –

  • The most common way is to underline the lines which need to undergo changes and strikethrough the ones that are not essential for deletions.

Example – Section 5 is amended as follows –

The term of the agreement shall be from 31/05/2010 – 31/05/2019  31/05/202

The terms of the agreement 

For example – the term of the agreement shall be amended from 01/03/2000 to 01/03/2001.

Term of the original contract 

For example – the term of the original contract of the non-addendum part of the contract shall in no way be affected by the addendum clause.

  • The next method is very common: a particular clause is completely severed or entirely changed or replaced with a new clause.
  • The next way of the amendment is describing the amendment 
  • First, the heading or the main amendment is stated and then the descriptions are given.

An addendum should always be attached with the original contract, the modified terms and conditions of the original contract shall be read in continuation with the original contract. Addendums of people – usually addendum is used to add more people in the partnership to change and determine the original contract. Therefore joinders are widely used to expand and clarify partnerships.

Steps of an amendment agreement 

  • It is very important to first read the original contract thoroughly.
  • The next step is to find out the lacuna in the original agreement and find out how we can overcome it.
  • Review the contract and see what could be done.
  • Have a fair discussion with the other party and discuss if they agree on the same parlance.
  • Then move on to the amendment part – always write the amendment part on top of the contract then clearly state the name of the parties, date when they were being amended, and time.
  • It is always regarded as best to describe such amendments and make a note of the pg no . and clause.
  • After completion of the amendment, state when and how shall the amendment come into full binding force.
  • Add the following details below – 

Terms of the original contract –

  • Have all the parties sign and make note of the changes.

Written vs oral amendment agreements 

It is always very important to note that a written agreement will act as a piece of evidence and uphill the battle in the court in case of a dispute rather than oral ones, oral ones are accepted but they are not safe, written documents are the best proofs of evidence. 

Modification of a contract before and after signing the contract

Pre signing 

If there is an error in the contract, but not completely pertaining to the amendment then such typing error or a grammatical error may be corrected even after the contract is signed by the parties.

Post signing 

Usually, pre-signing is done very easily but post-signing is very hard because it includes and involves all the consents of everyone in the partnership agreement. Sometimes even before amending the original contract may have a clause stating that if required the contract may be amended, modified, and supplemented.   

Amendments, consents, and waivers 

Commonly the concept of the amendment and waive off and consents are confused. An amendment is to make changes to the existing terms of the contracts but on the contrary, the concept of consent or waive off means to annul a term stated in the contract or nullify it as against what is written in the contract. The concept of consent and permit means – to give consent to deviate from the terms stated in the contract. Therefore, the actions of waiving off and consents should not be confused with amendments

Difference between amendment  and addendum 

According to a common man, the words “amendment” and “addendum “are commonly used but they have variations according to the Contract Act. Therefore in simple terms: 

  • The amendment means – changes to the existing clauses, revision, alteration all of it comes under the amendment.
  • Addendum means- addition to the existing clauses, sometimes if something crucial had probably been omitted previously addition of it to contracts is the amendment.
  • Sample format of an addendum –

Addendum to the contract (hereinafter referred to as the “Addendum”) shall be entered on ———

Between————and ———————, bearing the address of ——————–,

Emails id and phone number of the address shall be ———————-. They shall collectively be referred to as” parties “ hereafter, both the parties agree to the amendment of the contract, with regard to ———–,titled—————————–. A copy of the agreement shall be attached to the original contract. The addendum of the contract shall therefore bring about the following changes ——————————————————————————————————————————————————————————————————————————————————————————-   

The amendment shall be made with the amendment of both parties. This Addendum is acted in accordance with the laws of the state. This Addendum will be binding upon the parties. If any term of the contract shall be invalid or incapable of being enforced, all other terms, conditions, the other provisions of this Addendum shall be unaffected and remain in full force and effect. The Parties agree to the terms and conditions acknowledged by their signatures as follows:

Name: ______________________                                                         Name :    ———————         

Signed: _____________________                                                         Signed :———————–

Date: _____________________                                                              Date :————————–

(party A)                                                                                                                     (party B)

Conclusion 

Contract amendment agreement permits the parties to make changes that are agreed upon by an existing contact. An amendment agreement of a contract deletes, changes, makes addition to the existing agreement. While we need to be careful and bear in mind that while negotiating a contract, changes made while drafting the original contract are not amendments, as there is no existing contract, therefore an amendment agreement is made only to an original contract. An amendment is a legal way to bring changes to the existing contract, with new terms in writing with the understanding and agreement of everyone so that there is no room for misunderstanding.   

References


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