Modifying Your Contract
Contracts do not always remain consistent with the actual desires of each party over the term of the contract. Circumstances change, and projections confidently made at the time of contract execution may reveal themselves to have been significantly off-base. In some cases, you may have executed a contract in a rush, without considering all the implications – had you been properly informed of your rights and responsibilities under the contract, perhaps you would have negotiated different terms.
Contract modification is an all-encompassing term and covers minor and major modifications, as well as waiver/consent agreements that excuse pre-existing duties under the original contract.
All states let you modify a contract after it has been executed. Contracts are meant to be flexible tools for parties to use to reach an agreement (and to enforce the terms of said agreement). Though various legal protections are built-in to contract law to discourage manipulation, oppression, or fraud by any party, these protections do not necessarily prevent modification of an existing contract, so long as the parties unanimously consent to the modification.
As contract modification is a rather broad issue, let’s go ahead and tackle some of the basics first.
Partially-Performed Duties
If you or any party to the contract has partially performed their duties under the pre-existing contract, then it can be a bit more complicated to properly modify the contract without opening the door to potential conflict down the line. To ensure that everything goes smoothly, be highly communicative in your dealings with the other contracting parties.
As you draft the modifications, carefully assess the duties already performed under the existing contract, and whether such performance will receive due consideration. Similarly, if a modification will affect pre-existing duties (i.e., if it will heighten or reduce a party’s responsibility), then it may be necessary to revisit the compensation scheme to ensure that fairness is preserved.
Confused? Consider the following.
Suppose that you are a craft hobbyist and occasionally take bulk orders for clients over the internet. You received an order for a shipment of hand-crafted toys from one client. Before the delivery date, however, the client requests a modification of the original contract terms. In the original contract, you agreed to use a certain type of wood for the toys. The client changed their mind, however, and would like to use a different type of wood. You agree to the request, and thus, the contract must be modified to reflect this new agreement.
The situation is likely to be complicated if enough time has passed since the original contract was executed, however. Perhaps you already purchased a supply of the original wood type. Perhaps you even built some of the toys using that wood. Your contract modification must therefore take into account your efforts and expenditures. If possible, the modified contract should compensate you for supplies already purchased and toys already crafted.
Minor and Major Modifications
Contracts are highly flexible, and as such, there are a range of modifications that can be made, both minor and major.
Generally speaking, a contract assigns each party certain duties. If the intended modification simply means to excuse an existing duty or permit certain acts that were otherwise prohibited under the contract, then you do not have to directly modify the existing contract. Instead, you can execute a separate waiver or consent that references the existing contract.
Suppose, for example, that you have a contract for the provision of IT services to a small business client. The contract contains a boilerplate confidentiality provision that prevents you from revealing the fact of your service engagement to a third-party. As a freelance IT service provider, however, it would help you if you could reveal to potential clients that you worked with this particular business.
After some negotiation, the client agrees to waive the confidentiality provision, but only in a limited manner. You can reveal that you performed IT services for the client to potential clients only, in a private setting. You cannot reveal the service engagement on a public forum. Rather than modifying the existing contract, you and the client would simply execute a separate consent or waiver that clearly states the specific constraints of the consent or waiver.
Both minor and major changes can lead to a contract amendment, which is the direct modification of the existing contract. A contract amendment can be implemented in various ways.
Some parties prefer to strikethrough the original contract language and make “bubble” additions where necessary. This is fine for minor modifications, but can become quite sloppy when the modifications are more significant. Others prefer to write a full replacement section, where certain modified provisions are rewritten. So long as the modification language is distinct, clear, and readable, there should not be an issue with enforcement.
Modifications Are Subject to the Same Law
Contract modifications must satisfy the same legal requirements as a written-from-scratch contract. The legal requirements are not “relaxed” by virtue of the modification being minor. An enforceable modification necessarily integrates with the original contract, and as such, is subject to the same laws.
A contract modification must therefore be signed by all parties, each party must be properly informed of their modified rights and responsibilities, each party must be capable of legally entering into a contract (i.e., a contracting party cannot be manipulated or otherwise forced into executing the modification) and the modification must not result in a contract with an illegal purpose, among many other default contract requirements.