It’s common for contracts to require a change or two after they’re executed. However, since renegotiating and signing a new contract is time-consuming and often unnecessary, lawyers resort to addenda and amendments.
Let’s figure out what addendum and amendment are, how they differ, when to use which, and how to manage them effectively.
What exactly are contract addenda and amendments?
The legal terms “amendment” and “addendum” not only sound and look similar, but they can also yield similar outcomes. This similarity leads people new to the concepts to often misuse them, so it’s essential to clarify the definition of each term.
Сontract addendum
An addendum is an addition to the primary agreement that specifies or broadens the contractual information, leaving the initial terms and conditions intact. Addendums can only broaden something previously mentioned in the original document.
An addendum must be written in a supplemental document and then attached to the original contract.
Сontract amendment
An amendment is any contract modification that alters the existing contractual terms. It can be a minor change in a single clause or a significant change that substantially affects the partnership’s terms and conditions. Amendments can also be one-time or recurring, depending on how many times you need to update the information. New information — new amendment.
Amendments can include changing the price or quantity of a product or service, moving deadlines, modifying the technology, removing responsibilities, and more.
To make the difference crystal clear, let’s see how and when you use an addendum or amendment.
Contract addendum vs. amendment: three critical differences
Amendments and addendums both happen post-contract to alter or expand the contract’s terms and conditions and add new information. However, the difference between the addendum and amendment is quite substantial.
1. What are they meant to do?
The addenda are meant to extend and supplement the original agreement with additional information, leaving the previous terms and conditions in full force.
The idea of amendments is to change something about the existing deal. These changes often address modifications in demand, price, due dates, and so on.
2. Who is authorized to make them?
Anyone can draft an addendum, but to be enforceable, it needs to be reviewed and signed by the legally responsible parties before attaching it to the original document.
As amendments entail changes to the initial document, only those who created and signed the initial agreement or their legal representatives have the authority to compose them.
3. How do you make them?
An addendum to a contract is always a separate document attached to the original contract. After you draft the addendum, everyone who signed the original contract must agree, sign, and, in some cases, notarize it. Once done, you attach the addendum to the contract along with a statement that the original document is only valid with Addendum X attached.
On the other hand, to make an amendment, you must edit the original document. This means striking outdated provisions and substituting them with the new language. Then all parties must sign off on the alterations to make them enforceable.
These are the main differences between contract addenda and amendments in a nutshell. However, you need to know about more nuances if you regularly manage them in high volume.
How to manage amendments and addenda efficiently
If you manage your contracts using Word, Excel, Gmail, and a separate e-signature service, making changes to the documents is a real headache. With each added contract, the pile of things you have to watch out for only grows, increasing your workload.
The job gets much easier when you implement dedicated contract lifecycle management (CLM) software. For amendments, a CLM solution allows you to assign the responsible parties to review, sign specific contract clauses or sections, and send them back to you from a single system. Instant alerts about changes and updates remind the responsible parties about the deadlines and keep you in the loop.
Creating an addendum is as easy: you can choose a template, create a draft, add it to the original agreement, and assign the responsible parties to review and sign it, all without leaving the platform. All set! No Word docs, spreadsheets, or mail strings needed. You’ll never lose any addenda and amendments as they are attached to the right source contracts, and the audit trail is right there.
This way, you get an automated end-to-end workflow across one platform, reducing the headache of handling myriads of document changes in different systems.
Bottom Line
While a contract addendum and amendment are similar in purpose, they are two different concepts that require separate workflows and assignees. Make sure you understand the difference and know when to use each.
And CLM software can help with managing your contracts with or without any additions. Try the AXDRAFT demo and make dealing with addenda and amendments a cakewalk!
FAQ
An addendum is a separate document created and attached to a signed contract to add nuances to or extend the terms and conditions of the contract. The original terms and conditions remain intact. An amendment, on the other hand, is a change to the original contract that alters some of its original clauses or sections.
Let’s take a real estate sales contract as an example. Imagine that after signing the contract, the seller agrees to sell the buyer some furniture for an agreed upon price. You would attach a document with this information to the initial contract, but all the other terms of the contract would remain in force. This is an example of an addendum.
The term addendum derives from Latin and translates as “to add something.” Therefore, the addendum is information all the key parties have agreed to add to a contract. This information becomes an integral part of the contract and must be attached.
A variation is a temporary change of some contractual terms that doesn’t always need to be written in the contract to be enforced. For example, you and your contractor verbally agreed that this time you move the deadline. An amendment is a permanent (before changed again) change in the agreement that must be written in the contract and signed before it can come into force.