In Short
- Contracts can be amended to correct errors, update terms or reflect changed circumstances.
- Both parties must agree to any changes for them to be legally binding.
- Proper documentation of amendments ensures clarity and enforceability.
Tips for Businesses
Before altering a contract, check its terms to understand the amendment process. Document all changes in writing and have both parties sign to confirm the agreement. This helps prevent disputes and maintains the contract’s integrity. Seeking legal advice ensures amendments are executed correctly and comply with relevant laws.
As a small business owner, you may have signed many contracts to keep your business afloat, such as contracts for the supply of goods or services. Once you and the other person or business (‘the other party’) has signed a contract, you are legally bound by the agreement. From time to time, the other party may want to vary or amend a contract soon after the agreement comes into effect. However, they are not allowed to change the terms of the contract without your knowledge or consent. This article will explain how the other party must obtain your consent or notify you if they want to change a contract.
Why Do You Need Notice or Consent?
When entering a contract, you and the other party have agreed to the terms based on the information or situation at the time. Once the contract comes into effect, however, the other party may seek changes that better reflect their business needs. In this case, you may find that the other party may wish to change the contract by:
- adding a clause;
- deleting a clause; or
- drafting a new contract to replace the old one.
Any proposed changes to a contract can be seen as a new contract. Therefore, if you are going to accept any changes to the contract, both you and the other party will have to satisfy the elements that make a contract:
- Offer and Acceptance: The other party must make a clear offer (such as providing you with a draft of the proposed change to a clause), and you must show you accept the change by either signing or agreeing to the change verbally.
- Consideration: There must be an exchange of value, such as the exchange of money.
- Intention to Create Legal Relations: Both of you should indicate if you will bind yourself to the new changes, such as signing a new contract with the proposed changes included.
If the other party changes the contract without notifying you or getting your permission, they have not obtained your acceptance. You will not have formed a legally binding agreement with them, so those changes will not be enforceable.
However, if you do agree to their changes and satisfy the elements of a contract set out above, you and the other party will have formed a legally binding contract.
Download this free Commercial Contracts Checklist to ensure your contracts will meet your business’ needs.
How Can Someone Notify You?
If the other party wishes to change the contract, they can either:
- change the contract on their own and notify you of the change, which you then accept; or
- ask you if they can change the contract.
The first scenario frequently occurs when there are changes to terms and conditions in online businesses.
However, the situation is quite different if the other party wants to change the meaning or performance of an essential term in the contract.
You will want the business to ask permission to change the timeframe to 14 days. Otherwise, you may inadvertently struggle with cash flow if you expect payments within five days. If you agree to this change, you should have both parties agree in writing that this term has been altered, to ensure that in the case of any dispute arising in the future, you have a record of the change agreed between both parties.
Continue reading this article below the formHow Should I Manage Changes?
You should consider including an ‘amendment clause’ in your original contract to manage any proposed changes the other party raises.
Your amendment clause can help outline a transparent process for you or the other party to change the contract.
For example, you may want the other party to propose changes to the contract by:
- striking out any proposed deleted text; or
- inserting new changes in red line.
You can then review, negotiate or agree to the changes. Ensure you outline how you will agree to any changes, such as via email or another written agreement.
Parties may sometimes use a deed of variation to modify an existing contract. A deed of variation is a legal document that allows you to formally set out the specific changes to an agreement without creating an entirely new contract. This can be useful when you need to alter particular terms while keeping the majority of the original agreement intact. Like other contract changes, all parties must agree to and sign the deed of variation for it to be legally binding. A deed of variation can be more efficient than drafting a new contract, especially for minor modifications. However, ensuring that the deed clearly outlines which terms are being changed and how is crucial.
You can require the other party to ask for any changes to the contract, even if you do not have a written amendment clause or if you have an oral contract. You will verbally discuss and agree to any proposed changes for oral contracts. However, verbally agreeing to changes comes with risks. If there is a contractual dispute, you or the other party may struggle to prove whether you agreed to any contract changes. Therefore, you should consider agreeing to any changes in writing.
Key Takeaways
A contract cannot be changed without your knowledge or consent. You will not be bound by any proposed changes unless you have accepted or given consideration to the changes. An amendment clause in the original contract will help you manage any proposed changes.
If you are varying a contract, our experienced contract lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
If the other party changes the contract without your knowledge or consent, those changes are not legally enforceable. You have not satisfied the elements of a contract, particularly offer and acceptance. The original terms of the contract remain in effect unless you agree to the proposed changes.
To protect your business from unauthorised changes, consider including an amendment clause in your original contracts. This clause should specify that any changes must be made in writing and agreed to by all parties. Additionally, maintain clear communication with the other party and promptly address any proposed changes. If significant modifications are needed, consider using a deed of variation or drafting a new contract to ensure all parties are in agreement.
We appreciate your feedback – your submission has been successfully received.
