Amendments or amendment agreements are agreements by which the parties’ original contract are modified. The common terminology refers to an amendment and to amend a contract. However, there is nothing wrong with modification and to modify. The terminology adjustment and to adjust should preferably be used in the context of numbers, percentages and amounts.
Supplements and addenda
It may well be that the parties do not intend to amend a contract but rather desire to expand it in scope or nature. This is done by way of a supplement or supplement agreement. Although supplements will often also amend existing arrangements between the parties, their main purpose is to add something to an existing arrangement. From a legal point of view, you may equally call a supplement an addendum.
Although a settlement agreement is typically drafted in the context of (the settlement of) a dispute, the outline and clauses are largely similar to those of an amendment. If a settlement agreement relates to a dispute under an agreement, the parties can settle by simply amending the provisions that require amendment. In a settlement agreement, the recitals would express the background of the dispute or the uncertainties amongst the parties, and the provisions in the body text should be pragmatically dry and factual. It is strongly recommended not to restate both parties’ positions in the dispute but to use objectivity and to refrain from emotionally charged statements.
Format and contents
An amendment, supplement, addendum or settlement preferably takes a format and structure similar to the amended or supplemented contract. In the body text, the parties add, remove or replace definitions, obligations or other statements by new ones. Removed sentences can be identified by the first and the last words of the sentence (together with the section number). Inserted or amended text can be marked in italics, to clarify what precisely is being inserted or amended. It is not common for an amendment agreement to expressly eliminate provisions, which have been executed or performed already. There is no need to agree that such provisions have ceased to be effective.
Sometimes, often after many years, the parties desire to continue an existing relationship but with certain amendments of the existing contract (e.g. in order to adapt the contract to newer standards of compliance, to align the contract better to the actual practice of doing business or to take out established ambiguities). In such case, the entire contract may be replaced by a restated and amended contract. This would only be visible in the title of the contract, probably the whereas clause and an entire agreement clause (i.e. which terminates the old contract).
Best practices relating to amendment agreements
One of the general drafting principles is to ‘be accurate’. It implies that when an amendment involves adding, deleting or replacing less than an entire provision (a word or two, a phrase, a sentence, or perhaps an enumerated clause), the drafter generally has two options. First, the original clause can be amended by specifying only the exact change being made. Second, the drafter can restate the entire provision.
For example, the original agreement provides in section 6.1 that: this Agreement shall take effect from the Effective Date and continue into force until 31 December 2022. If the parties agree to amend the Agreement, the two approaches could result in the following amendment clauses:
In the Agreement, “31 December 2022” is replaced by “30 June 2023”.
The first sentence of section 6.1 is amended to read: this Agreement shall take effect from the Effective Date and continue into force until 30 June 2023.
The first approach is more concise and has the advantage of being specific about the change that was made. The disadvantage would be that amendment is presented out of context, placing the burden on the reader to consult the underlying agreement as well. The second approach, restating the amended provision in its entirety, avoids that problem. A middle ground approach would be to describe the amendment in the recitals.
Defined terms in amendment agreements
In an amendment (or supplement or addendum) it is common practice to adopt the defined terms of the Agreement:
Unless otherwise defined in this Amendment, a capitalised term has the meaning ascribed to it in the Agreement. In addition, in this Amendment:
Do not copy, summarise or restate a defined term for no reason. Be accurate in the use of defined terms. For example, if the amended agreement uses definitions in connection with certain (not amended) concepts or covenants and the amendment introduces a new concept (without affecting the concepts or covenants used in the amended agreement), do not amend a defined term in such manner that the definition as used in the amended agreement is also changed. In such case, it is appropriate to emphasise that the redefined term only applies in the amendment:
For the purpose of this Amendment only, Technology means…
For the purpose of this Amendment, Products include…
Confirm validity of the rest
It makes sense to express, as a miscellaneous provision of the amendment agreement, that the remainder of the agreement is unaffected (and, for people who fear the force of oral or accompanying promises, some ‘entire agreement wording’):
Except for this Amendment, the Agreement remains unchanged. The validity of all terms and conditions not expressly amended by this Amendment remain unaffected. This Amendment constitutes an integral part of the Agreement, sets forth, together with the Agreement, the entire agreement between the Parties in respect of the subject matter of this Amendment and the Agreement, and supersedes all discussions or understandings between the Parties relating to this Amendment and the Agreement.
Do not exaggerate with your amendment agreement
In many cases, a simple e-mail by a person authorised to represent a party to the representative of the other party will be adequate evidence of an extension of the contractual term. The general drafting principle to be accurate does not, however, impose a level of precision as follows. In the example, an enumerated paragraph would be added at the end of the existing enumeration in the Agreement:
The Agreement is amended as follows:
(a) paragraph 10.2(l) is renumbered as 10.2(m).
(b) after paragraph 10.2(k), following provision is inserted as paragraph 10.2(l): “enter into, amend or terminate any management agreement, partnership, joint venture agreement or any other agreements other than in the ordinary course of business;”
(c) the word “or” at the end of paragraph 10.2(j) is deleted.
(d) in Sections 4.3 and 6.2, the cross references to (Section) “10.2(k)” are replaced by “10.2(l)”.
Needless to say, this example is somewhat overly detailed. Try to catch (a), (c) and (d) in one sentence: In the Agreement, paragraph 10.2(l) is renumbered as 10.2(m); and in Sections 4.3 and 6.2, the cross references to (Section) “10.2(k)” are replaced by “10.2(l)”. Similar cases of excessive detail would be to identify how, in case the last or the penultimate enumerated clause is deleted, a semicolon is replaced by “; or” and a full stop inserted.