In regular course of business companies/persons will enter into a contract to establish a legitimate business relationship amid the parties and to clearly define the legal/business terms and conditions of such business relationship.
At times, the parties may need to add/alter certain terms and conditions of such business contract as a consequence of the changing legal/business requisites of the business relationship.
Here the question is how the parties will add/alter the terms of a contract?
Typically, the parties to the contract will draft an ‘Amendment‘ or ‘Addendum’ to effect certain modifications or additions to the original contract.
But Amendment and Addendum are not the one and the same as the drafting of ‘Amendment’ and ‘Addendum’ as supplement documents will have different implications in the original contract.
Any modification/alteration to the existing terms and conditions of the contract will be performed via Amendment – Addendum will be used to add additional terms and conditions to the contract without altering the existing terms and conditions of the contract.
Amendment illustration: Parties to the Contract wanted to modify the governing law from ‘New York’ to ‘California’, then the parties will execute an Amendment to modify the governing law as stated above.
Addendum illustration: If the parties missed to include the entire provision of ‘Governing Law’ during the time of the execution of the original contract, then the parties will execute an addendum to induct the missing governing law provision into the contract.
From the aforesaid illustrations it can be inferred that amendment will be right weapon to dodge modifications to the existing terms and conditions of the contract. Addendum is the accurate document to add new terms and conditions to the contract.
An amendment can only be executed and signed by the parties to the original contract – No person who is not a party to the original contract will be authorized to sign the amendment document.
On the other hand, an addendum can be created by third party who is not a party to the original contract.
An Amendment will be treated as a part of the contract. An addendum will be a legally binding part of the contract.
In the case of addendum the best thing to do is to include a statement in the original contract to the effect that the contract is not valid in the absence of the addendums as attachments to the original contract.
If a original contract has multiple amendments/addendum – It will be useful to put the description of original contract and its prior amendments/addendum in the latest amendment/addendum to give a glimpse of the history of the original contract along with amendments/addendum for the reviewers.
Accordingly, reviewer will review all the documents in the contract chain in course of any renewal/revision/addition to the contract without missing any crucial information integrated in the contract via amendments/addendum.
Learning the distinction amid the amendment and addendum will facilitate the drafting person when to use amendment and addendum as a supplement document to the contract.
In simple, Use the Amendment to modify the existing provisions and Use Addendum to add new terms and conditions to the existing contract.