Ch-Ch-Ch-Ch-Changes: How To Amend Your Small Business Contract

Your contract is finalized and all of the parties have signed on the dotted line. Congratulations – you are ready to get to business! Until … one of the parties to the agreement wants to make a change. Now what?

The first thing you need to do is review your contract. Typically the contract will set out how to deal with amendments. An amendment provision is found in all of the template contracts that I sell on my website. This language is often found near the end of the agreement. Often it will say that both parties have to mutually agree in writing on the amendment. You need to abide by the language in the contract in order to legally amend the agreement. If your contract is silent on amendment, I suggest revising your contract using an amendment agreement, as outlined below.

Once your have reviewed the contract and understand how it needs to be amended, let’s move on to the practicalities as to how this actually happens. Below are a few different ways to amend a small business contract.

1. Strike-through and insertion: this is really only useful if it is a minor item that needs to be changed. Perhaps the address was written 516 and should have been 561 or perhaps the name of a party was misspelled. For something simple like that, the parties can strike-through the error and write the correct text above. Both parties need to initial or sign the change. For any changes that are not minor (i.e. deleting a paragraph, changing fundamental terms, etc.), do not use this method. It can lead to confusion, which is not what you want in your legal agreement. Your agreements need to be clear.

2. Amendment Agreement: this is a separate agreement that sets out the exact changes that need to be made to the original agreement. For example, if you want to delete certain words in a paragraph, you would indicate this in an amendment agreement. Often, to avoid confusion, the parties would agree to delete the paragraph entirely and replace it with new text. If that is the case, this would be clearly spelled out in the amendment agreement. The amendment agreement needs to refer to the original agreement, be signed by both parties and ideally be stored with the original agreement.

3. Revise and re-sign the original agreement: be cautious when using this method.

By revising the original agreement, you are opening the door to re-negotiating the entire agreement, parts of which you may have thought were finalized.

What this method entails is essentially scrapping your original agreement, drafting a new agreement and signing this new agreement. If you do go this route, you should refer to the original agreement in the new agreement and that this new agreement replaces and supersedes the original agreement.

Of the three methods outlined above, it is the Amendment Agreement that is used most often in practice and the one that I recommend in most situations.

If written properly, it is a clean way to revise your small business contract.

How do you amend your business contracts? Please let me know in the comments!