Addendum vs. amendment: What is an addendum and 2 key differences.

How does an addendum work?

Written after the fact compared to the original contract, an addendum (or several) can be added to the document at any time. Addendums are created to record any proposed changes to previously agreed-upon terms. Some may further limit the scope of a relationship, while others may broaden the range of terms where the contract applies. An addendum may sometimes make content in the original agreement void moving forward.

To add an addendum to a contract, the initiating party drafts the copy to outline the preferred changes. Entries can include anything from original text explaining a unique situation to other supporting documents such as brochures, rate charts, or blueprints, defining as much information as possible to ensure the new arrangements are precise.

When the addendum is drafted and ready, all affected parties must review and sign the document for it to take effect. Included signatures may be from witnesses or notaries. The signed addendum will be considered part of the contract once finalized.

Types of addendums.

All industries can use addendums to update or clarify terms in active contracts. From rental agreements to employment contracts, addendum modifications can be made to any arrangement between two or more parties if all agree on the new terms.

While most addendums take the form of documents added to the end of an existing contract, different types can be used depending on the enacted changes:

• Clarification — explains terms from the original contract in more detail to eliminate confusion

• Confidentiality — redefines what information can be shared with outside parties and what must remain private

• Contingency — outlines terms or occurrences that could alter the viability of the contract

• Execution — stipulates the individuals needed to approve a contract, including required signatures and the time frame for the contract’s expiration

• Change — includes any alterations to the original terms because one or more parties believe the initial contract was too vague or limiting

Example addendum.

Effective addendums are concise in language and detailed enough to eliminate any doubt regarding the requested changes to the contract. While addendums will vary depending on the type and the industry, here’s an example.

How does an amendment work?

Amendments are usually more precise or smaller in scope than addendums. Instead of adding to the original contract, an amendment changes a part of the document for the long term rather than a one-off exception. They are particularly important to help everyone involved avoid unintentional breaches of contract that can occur as circumstances change.

To add an amendment to a contract, one party identifies a potential change to the initially agreed-upon terms and drafts a brief letter to propose specific changes. Amendments are commonly created to change:

• The term or duration of the contract

• The pricing of goods or services

• The individuals responsible

The drafting party presents the letter to the other parties for review, redlining, and approval. Once all required individuals sign, the amendment becomes binding to the contract.

Example amendment.

Amendments are helpful in several situations, but one of the more common uses is to modify existing sales agreements. Here’s an example to get you started on your template.

Can you add an amendment to an addendum?

A contract amendment can be made on a preexisting contract addendum. However, amending the scope of the original contract may be more efficient if possible and agreeable to all parties involved.

Amending a contract addendum can be simple and mimics the process of submitting an amendment to a regular contract. General recommendations include:

• Keeping everything in writing. Clarify the amendment, outlining the exact scope elements of the changing addendum. You will want to reference the title of the original contract to keep everyone visually aware of the scope change.

• Ensuring intent at every stage. Intent must be present for any contract or amendment to be legally enforceable. Work to document this wherever possible to supplement your process.

• Walking away with fresh, new signatures. Every time you amend an agreement of any type, obtain the signatures of all parties involved to prevent future legal complications.

When can a contract be updated with an addendum vs amendment?

Changes can be proposed to a contract at any time. Remember, making changes before a contract is signed and executed by the required parties is easier and quicker, as the addendum or amendment will require additional review and signature.