The Lowdown on a Contract Addendum
A contract addendum is an additional document that is used to modify the existing agreement between the parties. It addresses any additional terms that need to be included or any modifications that are necessary because of some issue that has occurred after the original contract was created and signed. It is important to make sure that all changes that are made to contracts are done in writing, for the protection of both parties . If one party does not hold up their end of the contract, there will be a written record of the changes that were made and the fact that they were agreed to. Verbal modifications are very simple to dispute, especially if no record was kept at the time. In some cases, an amendment to contract templates in Word is used instead of an addendum. An amendment essentially terminates certain provisions of the contract and replaces them with new terms. An addendum adds to the original terms but does not take any of the terms away.
Advantages of Employing a Template
The use of a template for an addendum has several advantages. First, the biggest time savings is that by using an addendum template, you have a base that is already structured, leaving you with only the task of editing and filling in the information that is specific to that contract and addendum. Just as in other types of contracts, having a base or template for your addendum represents a significant savings of time.
Second, by using the same addendum template time and again, you bring consistency to your contract documentation. Especially for large companies, it is very important to be consistent with the language used, as otherwise, there can be different meanings placed on similar language. If the same language is used time and again, that consistency helps to keep it from being confusing or misinterpreted.
Third, by using addendum templates, you are proactively reducing the chance that your contract may be held voidable. When you use a template, as the addendum template, you will already ensure that you have all of the necessary terms that the company would require for the addendum, so that there is no question as to what the terms are that it is agreeing to by signing the addendum.
How to Draft an Addendum to a Contract in Word: A Step-by-Step Guide
Creating an addendum in Microsoft Word is a straightforward process that can be accomplished with a few simple steps. In this section, we will guide you through the process, outlining the key elements to include in your addendum and providing formatting tips to help ensure that it will blend seamlessly with the existing contract.
To start, you want to open a new document in Microsoft Word. We recommend that wherever possible you use the same font and font size as in the existing contract. This will help make the addendum fit in better with the rest of the contract. Appendix A of this blog has more information on appropriate fonts for the State of Tennessee. Once you have the document open, you can title it something along the lines of "Addendum" or "Addendum to (insert the name of the current contract)." Below the title, insert the date of today’s contract. This can be typed or you can use Word’s date insertion function to insert it. This function can be found either under Insert – Date and Time or by pressing Control-F11.
The next step in creating an addendum is to insert the title of the contract that it is amending. The title should match the title of the original contract exactly so that there is no confusion on whether or not the addendum is truly an addendum to the correct contract. The best way to do this is to copy and paste the title from the original contract into your addendum.
Underneath of the title of the contract in the addendum, type or paste the following sentence: "This addendum is being entered into pursuant to Section [insert the appropriate section number from the existing contract that outlines how changes are to be made to the contract.]"
Now that you have the top part of the addendum formatted and the introductory materials typed, you will need to insert each of the changes from the original contract. If the purpose of your addendum is to add an entire new section to the contract, then use the same language and numbering scheme that was used in the original contract for the new section. For example, if Section 12 of the contract is titled "General Conditions", then the addition of a new Section 12 would be titled "General Conditions" and the numberings and text would match those of the original Section 12. However, in the example of the new section, you should indicate that the text is an addition to the existing contract by using some sort of bracket or comment similar to this:
12.1 General Conditions.
12.2 Addendum 1 to Contract Number_________dated________between (Agency) and (Vendor) of (Insert the City Name here).
If you are inserting a complete new section into the Contract, you will need to change the numbering of the remaining sections. In the example below, Section 12 is added to an existing contract between the Department of Finance and the Social Security Administration concerning delay of implementation of the Integrated Tax System.
- 1 General Conditions.
- 2 Addendum 1 to Contract Number 37301-01751 dated 9/22/2017 between the State of Tennessee Department of Finance and Administration and the Social Security Administration for Delay of Implementation of the Integrated Tax System
- 3 Delay of Implementation of the Integrated Tax System
The new section is added to the old and all subsequent sections are renumbered. A similar process can be used when modifying an existing section. You would simply use a similar or bolded text format to indicate the additional information as in the below example to modify Section 11 of the Contract:
11. Records Maintenance.
Each time the Agency processes a request for personal information from the Vendor on behalf of the Agency, the Vendor shall submit a copy of the request to the Agency’s Records Maintenance Coordinator. However, the request need not be submitted to the Coordinator if the request is submitted to the Vendor electronically through an electronic service such as the Integrated Business Tax System (IBT).
Finally, you will want to make sure that the bottom of the addendum is formatted similarly to the existing contract. The existing contract should list both the authorized signers, as well as whoever will witness their signatures. The addendum should match this formatting exactly to ensure that the addendum looks similar to the rest of the contract.
Typical Sections within a Contract Addendum
The contract addendum’s opening may state where the parties reside. It may also restate the date of the original contract. In some cases, the addendum will restate the preamble found in the main agreement to have it appear as part of that contract. In this case, the addendum will explain its own purpose, which is to amend the original contract. The introductory section may also express the contract addendum’s reason for being prepared in the first place. Most commonly, that reason has to do with the inclusion of a new provision within the main contract. If the amendment pertains to a specific section of the original agreement’s contract, many times the addendum will identify that section by its number. For example, "Section (X)" may also state, "Section (X) of the (specific) Agreement, dated, (date)." Amendment 1 to Section (X)."
After the preamble, the body will include a short set of numbers, letters or symbols. These are the same numbers, letters or symbols found in the main agreement’s contract. The sound arrangement of itemized sections makes it easy for the reader to view the changes that have been made. Itemized sections of the main contract may be expanded to reflect the new changes. The addendum’s contract will often replace the original section entirely, omitting the information within it to do so.
There are some occasions when the contract addendum will require signatures from both parties. This applies when the addendum amends an original form and those altering the document also hope to alter the original form. The signatures apply to both documents, granting permission for the amended document to reflect the original contract amendment.
Many contract addendums divide both parties up into groups. For example, "Landlord" and "Tenant." Next, the contract addendum states which party (or both) has the right to modify the document by signing it. "Landlord and/or Tenant," for example. The contract addendum will typically arrive with a line for both parties to sign.
Sample Editions of Contract Addendum Templates
The industry or type of contract may also factor into the structure of a contract addendum template. Below are just a few examples of specific templates that can be used for different types of contracts.
Template for a Residential Lease Addendum
This is a simple template. Since specific provisions depend on the underlying lease agreement, a reference to that agreement should be included in the addendum. That would then be followed by a short list of addendum provisions that will likely be added to the existing lease.
Template for a Construction Contract Addendum
This template is similar to the above template in that it simply notes that the addendum is to be attached to a specific contract. Within the addendum should be specific references to the base contract, followed by any additional provisions that the parties want to make.
Template for a Termination of Contract Addendum
The addendum would likely state:
This Addendum to Contract is attached to and made part of the Contract dated _______ between (Name) referred to herein as Owner, and (Construction Company Name) referred to as Contractor for (project name). As of this date of signature (date) , the following addendum is made to the contract (list additions, deletions, modifications, etc). All items not modified by this Addendum shall remain in full force and effect. This Addendum shall include additional items to be performed by (Contractor Name) as follows (list additional items, work, agreements). The Contractor agrees to perform the additional items listed above and use his/her best effort(s) to complete them within the time frame as set forth in the original contract. This Addendum shall serve as an Agreement of the parties and shall supersede any and all prior agreements and negotiations between the parties. This Addendum may not be modified or amended except in writing and signed by both parties.
Template for a Waiver of Liability Addendum
This addendum shall serve as a waiver of any liability for any damage(s) or accident(s) incurred by (Contractor’s name) while providing (services provided) on (location of services provided). The undersigned do hereby indemnify and hold (Contractor’s Name) harmless from any such incident. This is to certify that I (Owner’s Name) have read this addendum (or waiver) and agree to its terms and conditions on this (Date).
Legal Aspects and Best Practices
To ensure that a contract addendum is legally binding and enforceable, there are a few factors to consider:
- Intent to Modify: The parties must have a mutual intent to modify the contract. Generally speaking, this is evidenced by the signature of the parties and the agreement of the parties on the amended terms. It is not unusual for a party to sign an addendum without having read it, so if the parties sign an addendum that does not satisfy this requirement, it may be challengeable.
- Consideration: In most jurisdictions, consideration must be given in order to support modification of a contract, whether done by way of an addendum or otherwise.
- Clarity: An addendum should always be clear as to what terms of the original contract it seeks to modify. Moreover, where it further purports to supersede the terms of the original contract, such change should be clearly stated. When an addendum specifically states that it supersedes certain conflicting provisions of the original contract, a court is unlikely to look behind this when enforcing the terms of the addendum.
Best practices to follow in preparing a contract addendum include:
- Always specify which sections of the original contract are to be modified. If the changes are to be effective as of a particular date, specify that date.
- Always include a signature and date block for both parties.
- Make sure that all of the prior terms of the contract that you want to remain in effect after the modification have been properly incorporated into the addendum so that they are clearly subject to the modification.
- Leave sufficient space in the addendum for signatures and standard provisions, and always paginate each page and include a signature block on each page with a check box for initialing.
- Review the governing law/material provisions/actions provisions of the original contract and make any necessary changes to conform the governing law/material provisions/actions provisions of the amendment with those of the original contract.
Common Queries
I’ve never used an addendum. Do I really need one?
It depends. If you’re simply adding a contact person or the new owner of your business, then you can make those changes directly to the contract. But if you’re reorganizing your business, changing locations, or making a major change, an addendum may be in order.
How do I get a copy of the original contract to create and share the Addendum?
Just print a copy from Word. Or, you could contact the person or company with whom you made the original contract. Sometimes a client building an addition to their house will ask us for a copy of the original home construction contract to provide to the contractor. Many times, a landlord will request a copy of the original lease from the tenant. But, don’t take it personally! It’s not you, it’s just good business to keep a copy of all of your important contracts, notes and correspondence.
I paid to have a lawyer create my contract, will I have to pay to have it modified through an addendum?
Not necessarily. Most businesses will provide their clients with generic forms as "boilerplate" documents. However, if your specific situation was drafted in detail , you will need to discuss with your lawyer how to handle the changes. Some lawyers offer a monthly retainer that includes contract changes.
How much does it cost?
Will vary based on who you use and their fees. Legal contracts are no different than consumer issues; you get what you pay for. The cost to build a Church Playground will be the same no matter who draws it up and pays for it. But, getting the wrong contractor to build your contract could cost you far more in the long run than paying up front.
How long does it take?
Two minutes or a little bit longer if you need to go back and forth with your lawyer and have them create the new version for you. It’s well worth the time and investment.
Will building an addendum void my current contract with the other party?
No! It adds to your contract, augmenting it with more details that were not laid out in the original document. Think of it as a time-stamped file to show the court what your intent was when you made the contract.
What if they don’t want to agree to the addendum? Can I just make the changes to the original document?
No. You have to go back to the original location and add to the existing contract using an amendment or addendum.
Can I just send them a new contract that addresses the changes?
No. Your original contract will remain in place and valid until the other party agrees to the new changes.