Summary
- A deed of variation is a legal document used to change one or more terms of an existing contract without replacing it entirely.
- It clearly records agreed changes and does not require consideration, making it useful for formal amendments to existing agreements.
- It is typically used where changes are specific and limited, rather than when the contract or parties change substantially.
- This guide explains deeds of variation for Australian business owners, including when to use them and what they should include in practice.
- It is prepared by LegalVision’s business lawyers, a commercial law firm that specialises in advising clients on contract law and amendments.
Tips for Businesses
Check your contract for any variation clause before making changes. Ensure all amendments are clearly documented, agreed by all parties, and properly executed as a deed. Use a deed of variation for targeted changes only, and consider a new contract if the changes are substantial.
A deed of variation is a formal legal document used by parties to change one or more terms of an existing contract without replacing the entire agreement. It allows businesses to update specific clauses while keeping the rest of the original contract in place, providing a clear and binding record of the agreed changes. This article explains what a deed of variation is, when to use it, and what it should include.
What is a Deed of Variation?
A deed of variation, otherwise known as a deed of amendment, is a legal document created by two people who wish to change one or more terms of their existing agreement. While it is possible to change an agreement through other methods, a deed of variation is the best option as it:
- clearly states the changes to the agreement; and
- does not require consideration (the evidence that each party is gaining something), unlike a new contract.
Is a Deed of Variation the Right Document?
When varying a contract, you must do so correctly. Errors might make your changes ineffective and the original agreement still applicable. Consequently, you may unintentionally break the rules of the original agreement if you act in accordance with an invalid variation.
The original contract will usually contain a section detailing when and how you can vary the contract. Therefore, you should familiarise yourself with sections relating to variations and ensure you meet these requirements.
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When to Use a Deed of Variation?
A deed of variation is appropriate when you want to vary the terms of a contract, and the contract requires any changes to be in writing and signed by both parties. A deed is recommended for high-value contracts or if the changes are significant or substantial.
You should not use a deed of variation if you are proposing to change the parties to a contract or if you are substantially changing a large portion of the original contract. If you are proposing to change the parties who benefit from a contract in some way, a deed of assignment or a deed of novation would be more appropriate. If you are making substantial changes to a large portion of the original contract, it may be cleaner to terminate the existing contract and create a new one.
What to Include in a Deed of Variation?
The deed should set out:
- the details of the parties;
- a brief description of the original agreement;
- a statement acknowledging the parties’ intention to vary the original agreement;
- the clause in the contract that allows for amendment;
- the variations you are making; and
- the date from which the variations will take effect (if different from the date of the deed).
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Key Takeaways
While it is essential to negotiate all the commercial and legal terms of a contract before you finalise it, you can make changes at a later date if need be. One way to introduce changes in a contract is through a deed of variation. This document allows parties to a contract to vary or change one or more terms of their existing contractual agreement. Creating a deed ensures any changes are in writing and signed by both parties without the additional contractual requirement of consideration.
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Frequently Asked Questions
A deed of variation is a legal document used to change the terms of an existing contract.
A deed is usually the safer option, as it does not require consideration to be legally binding. However, if you wish to make your variation through a new agreement, you must ensure that you set out consideration in the document.
A deed of variation should identify the parties, describe the original agreement, state the intention to vary it, set out the specific changes, and confirm when those changes take effect.
No. A deed of variation cannot replace or add parties to a contract. To change parties, you must use a deed of assignment or a deed of novation instead.
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