When negotiating a contract, or after a contract has been signed, you may want to modify, or change, the contract. For the most part, contract modifications require the agreement of all parties to the contract. This article will discuss how to legally modify a contract before it has been signed, and how to modify it after it has been signed.
What Is a Contract?
A contract is legally binding agreement between two or more parties. The average adult encounters contracts many times in the course of business and personal life. In some cases, these contracts are tied to significant life events: an employment contract for a new job, the purchase contract for a new home, or a contract to buy a car, to name three examples. These contracts are generally very formal, involving significant negotiation and sometimes requiring an attorney to review it before the parties sign it
In other instances, contracts may be so routine or commonplace you may not even recognize that you are a party to one. For example, each time you charge something to a credit card, the sales slip you sign is a contract to pay for the goods or services.
Contracts are governed by state law. Service contracts, like contracts to paint your house, are usually governed by state common law. By contrast, contracts for the sale of goods are governed by your state's version of the Uniform Commercial Code (U.C.C.).
Modifying a Contract Before Signing It
To be legally binding, a contract must be agreed to by all interested parties. For example, imagine you want to buy a car, but you do not like the price offered by the dealer. Even if the dealer signs the sales contract, the contract is not valid until you accept it (usually indicated by your signature). This seems obvious, but it is an important point: Contracts are not contracts until there is acceptance.
Before entering into a contract, you should carefully read it to ensure that you understand your obligations and the obligations of the other parties to the contract. If you do not understand it, or you have questions about the meaning of any sections of the contract, have an attorney review and explain it to you.
Often, contracts may be biased toward one party, usually favoring the party who drafted it. If you did not write the contract, you should take steps to eliminate these biases. Make a list of changes, or modifications, that you would like to see, then discuss them with the other parties to the contract. As a result of this negotiation, you may be able to change the contract so the terms or conditions are more favorable to you.
Minor modifications to a contract can be handwritten onto the document. Clearly write the changes, and sign your initials next to each change, before signing the entire document. If the other party agrees to the changes, the other party will also initial the changes and sign the document.
For major modifications to a contract, first negotiate those changes with the other parties, then ask the person who originally drafted the document to print a modified version of the contract. All parties should review the reprinted document to ensure that the correct changes were made, then sign the newest version.
Negotiating a contract is not easy, especially if you are not accustomed to it. It can feel awkward and uncomfortable. But negotiating is essential to getting the best possible deal. Check out Nolo's 11-Step Guide to Contract Negotiation to help improve your negotiation skills.
Modifying a Contract After Signing It
Once a contract has been signed, then it typically cannot be changed unless all parties to the contract agree to the modifications.
There are many reasons why you might want to modify a contract. Those would include to:
- extend it (for instance, lengthen a one-year contract by another six months)
- shorten it (perhaps end the relationship a few months early)
- change the quantity of items that falls under the scope of the contract (such as increasing the number of goods)
- add additional scope to the contract (such as the types of goods to be delivered), or
- change the payment terms of the contract (for instance, allowing installment payments).
Some written contracts may spell out how and when modifications can be made. For example, if you have a credit card, you signed a contract when applying for that card. The contract may have said that the credit card issuer could change the interest rate at its discretion. By signing the initial contract, you have already given the credit card issuer the right to make future changes.
Or, for example, a sales contract with a vendor might state that all changes have to be agreed to, in writing, by the parties that signed the initial contract. In that case, you cannot call the vendor, ask for price reduction, get verbal approval, and assume the vendor will follow through with the new pricing.
If the contract doesn't address the issue of changes, you will need to talk to the other parties to the contract, make sure that they agree to the changes, then, to be on the safe side, add a rider (additional section) to the contract that addresses the changes. This rider should be signed by each party to the original contract.
There may be instances where all parties to a contract are unable to come to agreement on changes. If that happens, you'll have to either live with the original signed agreement, walk away from the contact (if it has not been signed), or calculate how much it will cost to break the contract and decide whether it is worth the cost.
Questions for Your Attorney
If you do not understand the language in a contract, need to better understand the obligations of a contract or need help negotiating a contract, an attorney will be able to assist you.
Among the questions to consider asking your lawyer:
- Do you have prior experience with contracts similar to this one?
- Are there sections of the contract that you'd suggest I change?
- Are there sections of the contract that are biased against me?
- What are the potential ramifications if we can't modify this contract?