A contract amendment is a modification of the terms and conditions of a contract or subcontract.
How can contract amendments be managed?
Though we’ll explore contract amendments more in-depth, it’s worth noting that changing the structure, duties, obligations or rights of a contract requires increased oversight. Let’s explore contract amendments and how disparate, important and sensitive information can be managed, and contract amendments can be executed smoothly for effective contract management.
Contract amendment
A contract amendment occurs when a contract party desires to change the terms of an existing agreement. An amendment can entail a clarification, modification, or deletion within an original agreement. An amendment leaves the existing contract intact. However, parties get the chance to clarify details.
Use cases for a contract amendment
There are many use cases for a contract amendment. Here are three important ones to highlight.
- Extension: One reason for an amendment is when a contract contains a mutually agreed-upon expiration date, but one party may wish to extend the time frame agreed on in the initial contract.
- Changes in relationship: Another reason for an amendment may simply be the evolution of a business relationship. If a business relationship changes to the point of deviating from the contents of an original contract, the terms of a contract should be amended accordingly to reflect this development.
- The unpredictable: Contract amendments can also be implemented when facets of contract performance do not appear to be working out for various reasons – leaving parties unable to reach legally binding terms agreed on in the original document.
Signatures are generally required
It’s worth noting that signatures are typically required to execute the amendment process. Amendments made to a contract that aren’t executed with the signatures of involved parties may be considered null. An amendment commonly takes effect when contract parties sign the amended contract. Parties are then bound by the amended terms and the unchanged facets of the contract executed after the initial contract review and signatures.
‘Amendments’ and ‘addendums’ are not the same thing
Sometimes people confuse contract amendments with similar-sounding contract addendums. These are vastly different:
- Contract amendments are modifications, deletions, or clarifications to a contract. Nothing is added to a contract. Rather, an alteration is made to the original terms and conditions of the agreement.
- Contract addendums, meanwhile, add something new to a contract. Addendums add terms or obligations that were absent from the original contract or become necessary because of something that’s changed since the original agreement has been signed.
Managing amendments with contract management software
Let’s explore how to manage amendments with leading contract management software tools, such as:
- metadata details pages for contracts and subcontracts
- attachments, documents, and data on a secure contract repository
- secure user permissions for sensitive amendment information
- quick electronic signatures for amended contracts.
Organisations can use contract lifecycle management (CLM) software to easily configure contract details pages with user-configured sub tables to track amendments for each contract in their system. Each contract can have amendments, metadata and attachments stored in the same location within the CLM system.
Users can easily search for contract amendment documents, attachments, and metadata within a secure contract repository that allows them to search down to the term, word string, or even word level with search history, ‘did you mean’ functionality, and saved search terms.
Contract management software users can configure user permissions so that only assigned individuals can access contract amendments for management or edits. Changes made can be logged as versions for audit trail tracking – complete with timestamps, redlines and who made changes.
Contract managers, general counsel, law firms and other professionals engaging in legal operations and legal services can centralise amendment management for various types of contracts. When ready, amendments can be centrally signed with the ability to quickly sign documents online – thanks to electronic signature software integration!
Overseeing contract amendments and more
Now that you’ve learned about contract amendments and how to manage them, consider our contract management software platform that offers the tools mentioned above and more for effective amendment management – Contract Insight®.
Contract Insight is an award-winning contract management software solution that’s received acclaim from third-party analysts, legal professionals and many others. Users can successfully oversee amendments and other key elements of a contract with comprehensive contract lifecycle management. With a secure and centralised contract database, user permissions oversight, easy searching and electronic signatures, your organisation can seamlessly manage the contract lifecycle and exceed contract management KPIs.
To learn how to more easily draft contracts, get contracts reviewed, collaborate on negotiations, and much more to improve contract management processes, book a free demo of Contract Insight® contract management and eProcurement software today!
Contact John O’Brien, CEO at Four Business Solutions – global business consultants and software integrators specialising in business process improvement.