What is it called when you replace the original agreement with a new agreement?

If a contract already exists and you and the other party want to modify some element of it -- whether it's an addition, deletion, correction, or similar change -- an amendment is an ideal solution.

An amendment doesn't replace the whole original contract, just the part that's changed by the amendment (for example, the delivery date or the price for goods). If a contract requires extensive changes, it's generally wiser to create an entirely new agreement or, alternatively, to create an "amendment and restatement," which is an agreement that reproduces the prior contract with the agreed-upon changes. Read on to learn more about amendments to contracts and how to use them. (To see what a contract amendment looks like, check out Nolo's Sample Amendment to Contract.)

When to Amend a Contract

Whenever you and the other parties want to deviate from the terms of a signed contract, it's important to amend the contract instead of relying on the other party's verbal or written approval. If you fail to properly amend the contract and act as if you did, you might face penalties for breaking (or "breaching") the agreement. Read on to find out how to make the agreed-upon changes.

Modifications Before You Sign the Contract

If you modify a contract is modified before you sign it, such changes are not "amendments." If you wish to handwrite a change into an agreement that has been printed out for signature -- for example, because you noticed a typo at the last minute -- you can do so with a pen and have both parties initial it. Although not technically an amendment, these modifications are sometimes labeled as such.

Putting Your Amendment in Writing

Some contracts contain clauses like the ones explained below, which specify that all amendments must be in writing and signed by all parties.

Surprisingly, the requirement that modifications be in writing provided in the above clause is not always enforced. The reasoning, as expressed by one court, is this: Parties to a contract cannot, even by a written provision in the contract, deprive themselves of the power to alter or terminate that contract by a later agreement; so a written contract may be modified by the parties in any manner they choose. In other words, a contract clause requiring written amendments will not always be enforced. The chances of it being enforced go down if one or both parties relied on an oral modification in carrying out the contract.

This is not to say that you should disregard clauses requiring modifications in writing or prohibiting oral amendments -- or avoid using such clauses in agreements. Written amendments -- like written agreements in general -- have many advantages over oral agreements, and a party seeking to enforce an oral modification despite a clause prohibiting them will face an uphill battle in court. In addition, state law requires that some types of amendments must be in writing -- for example, amendments for transfers of real or intangible property and certain financial contracts must be in writing.

Amendments, Consents, and Waivers

There are times when the parties want to deviate from the agreement, but don't need to modify it. For example, one party to a nondisclosure contract might give the other party permission to disclose certain facts to certain people, even though that might technically violate the language of the contract. These deviations -- in which a party waives a provision or permits something that is otherwise prohibited by the contract -- are sometimes considered amendments, although they are more properly defined as "waivers" or "consents." Unlike an amendment, a consent or waiver doesn't modify the agreement itself; instead, it excuses or permits activities that are otherwise prohibited by the contract. Consents and waivers should be in writing.

Creating an Amendment to Contract

The goal when creating a contract amendment is to be as specific and concise as possible. The document can appear informal -- for example, like a letter agreement -- or it can resemble the original contract in font and layout. Generally, amendments come in one of three different styles which are discussed below, all with corresponding examples.

Method #1: Redlines and Strikethroughs

Under this method, you show additions and deletions to the contract visually, by underlining additions and crossing out deleted text. (Most word processing programs allow you to choose "strikethrough" as a font style choice.) A statement describing the process used to draft the amendment commonly precedes the amendment itself. An example is below.

Method #2: Replace a Clause in Its Entirety

In this method, when amending a contract you simply state that a whole clause has been replaced, and provide the new clause. Here's how it looks.

Method #3: Describing the Amendment

Using this approach, you describe the changes. This is often shorter but requires the parties to check against the existing text of the contract.

Contract Addendums vs. Amendments

Instead of amending your contract, you might use an addendum to add terms to the agreement. Unlike an amendment, an addendum does not change the terms of the original agreement. Instead, an addendum supplements the contract by adding terms or clarifying issues that were not in the contract. For example, if the contract does not specify prices of products or dates for delivery, you might draft an addendum to provide these details. For more information, read our article on how to effectively use addendums in your contracts.

Additional Information

For practical tips on getting your agreement in writing, read our article on making solid business agreements and contracts. If you're looking for an A to Z guide to everything you need to know about contracts, get Nolo's new book Contracts: The Essential Business Desk Reference, by attorney Rich Stim.

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