Contract management is a dynamic process. As a contract progresses, new needs tend to emerge. Assume your partner wants to expand the scope of your work — maybe more than once. Does it make sense to negotiate a completely new contract every time? Probably not, especially when it’s complex and involves multiple parties.
This is where a supplemental agreement comes in useful. In this article, we’ll run you through what a supplemental agreement is and what it looks like.
What is a supplemental agreement?
A supplemental agreement is a legal document that allows the signatories of an existing contract to modify or amend the contract terms.
A supplemental agreement is often used to change the service description, scope, period, or price stated in a contract and approve these amendments. It’s also useful when stakeholders want to continue using products or services after the contract expiry date. Rather than creating a similar contract from scratch, the parties can refer to the primary contract and stipulate a new end date in a supplemental agreement.
If you’re reading about supplemental agreements, you’ll likely come across the idea of contract amendment. A contract amendment is used in similar cases, but the two documents differ. Let’s see how.
Supplemental agreements vs. contract amendments
The key difference between a supplemental agreement and a contract amendment is that the first is a separate document that modifies the contract’s terms. The original contract remains intact.
A contract amendment, on the other hand, involves changing or updating certain parts of the main contract. The original parties then approve, review, and sign the updated contract.
So, supplemental agreements are stand-alone documents with some common sections.
Common sections of supplemental agreements
The structure and content of a supplemental agreement vary according to the signatory needs and the nature of the primary contract. Nevertheless, some sections appear in most supplemental agreements.
- Interpretation. This section defines the mutually agreed-upon meaning of words and expressions in the agreement.
- Amendments to the Main Contract. As the name suggests, this covers amendments to the primary contract and refers to the particular clause(s) being replaced or added.
- Notices. This specifies that all notices relating to the supplemental agreement are based on a notice provision in the primary agreement.
- Counterparts. This section confirms that each party signs a different but identical contract copy. It also specifies that the supplemental agreement isn’t valid until each party has signed at least one copy.
- Governing Law and Dispute Resolution. This states which law binds the terms of the supplemental agreement and how disputes will be settled, usually by referring to the same section of the primary contract.
It’s clear from the above that a supplemental agreement is a full-fledged contract with separate sections. This confirms the legal validity of all contract amendments.
A supplemental agreement may be the right choice if you only need to add new information to an existing contract while maintaining your original terms.
A typical supplemental agreement sample should include Interpretation, Notices, and Counterparties sections, as well as the Amendments to the Main Contract. As a result, all parties have a legal record of the changes.
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Supplemental agreements and addendums refer to the same thing. These are separate documents that add new terms to an original contract.
Legally speaking, you can call a supplement an addendum. When contract signatories wish to expand the terms of a contract without changing the original wording, they can add a supplement or addendum to the contract.
A supplemental agreement implies contract modifications that require both the contractor’s and contracting officer’s signatures. Therefore, a supplemental agreement is also recognized as a bilateral modification.
A supplementary sale is the sale of goods under an existing contract, which both parties must additionally agree to by amending the contract.