In many, if not all, contracts, a miscellaneous provision related to amendments, modifications, adjustments and other changes is included. In this blog post, I will discuss this fairly common boilerplate clause “amendments”.
A provision on amendments should address two elements. First, an amendment should be in writing in order to ascertain that both parties understand the scope and nature of any contract changes and to be able to keep track of the status of the contract. Secondly, it should not be possible to amend a contract inadvertently, binding a party to the informal promises of a junior sales representative, and should therefore be considered (and accepted) only by the persons authorised to act on behalf of the relevant party. Consider the following amendment clause:
Amendments. No amendment of this Agreement shall bind a Party unless it is in writing and duly signed by the Parties.
The inclusion of this provision attempts to prevent a business representative of one party making promises they cannot uphold and to prevent such promises from becoming binding because the other party acted in reliance of them. The amendment clause builds in the certainty that the management of a company and not an arbitrary employee is responsible for any assurances made by the Company. The scope of the provision is not as firm and certain as it appears, because if the same employee starts to repeat his promises and if the company appears to support this (or somehow acts accordingly), the company may nevertheless be bound. The Common Frame of Reference reflects this subtle distinction:
II. – 4:105: Modification in certain form only
(1) A term in a contract requiring any agreement to modify its terms, or to terminate the relationship resulting from it, to be in a certain form establishes only a presumption that any such agreement is not intended to be legally binding unless it is in that form.
(2) A party may by statements or conduct be precluded from asserting such a term to the extent that the other party has reasonably relied on such statements or conduct.
Because the law does not always uphold the strict enforcement of formal requirements, a company or its legal department should educate employees as regards the consequences of their informal and promissory behaviour.