Contracts serve as the cornerstone of business transactions and establish the rights and responsibilities of all parties involved. Once contracts are signed, they become legally binding documents on the parties and cannot be changed or amended at the parties’ discretion. However, there are situations where amending a signed contract becomes a necessity to accommodate changes in plans and circumstances. In this article, we will explore the process of amending a signed contract, offering insights and guidance to you. Review the Existing Clause in the Contract: In most contracts, you will find an amendment or variation clause within the contracts that outlines the conditions of making changes. These clauses are usually located at the end of the contract, often in the final few boilerplate clauses. The standard amendment or variation clause usually require prior written consent of all parties involved before any changes to the contracts can be made. For example, a common phrasing might state, “No variation of any provisions of this Contract shall be binding unless made in writing and signed by all parties.” If your contract lacks such a clause, the usual method is to make changes in writing. This can include email correspondence or other written communication. However, be cautious with handwritten notes in pencil or the absence of the other party’s signature in the amended copy, as these may not be recognised by the court as valid amendment, as confirmed by the Court of Appeal in Kee Wah Soong v Yap Boon Hwa and Another Appeal [2018] 1 LNS 1284. Amend the Contract in Writing While email or handwritten communication is more convenient, it is generally advisable to record amendments through a proper legal document known as an “Addendum.” An Addendum is a legally binding document that outlines the changes to the original contract, the changes may include adding a new clause, deleting an existing one, or modifying a clause. For example, common language used in an Addendum might include wordings like “The terms of Clause 1.1 of the Tenancy Agreement shall be amended to read as follows”. Once the intended changes are clearly defined in the Addendum, the parties involved in the original contract will sign the Addendum and date it to signify their consent to the amendments. In the event of disputes, the courts will consider the original contracts as well as the addendum to determine an issue. For example, in the case of Hewlett-Packard (M) Sdn Bhd & Anor v Agih Tinta Sdn Bhd [2022] 9 CLJ, the Court of Appeal referred to the addendum and determined that the respondent, who was initially not a partner of HP, later became an affiliate through an addendum with Sunlight, a partner of HP. Making oral changes to a contract is not recommended. This is because oral communication frequently results in more disputes and can prolong the process of ascertaining the parties’ intentions. In court, oral evidence is typically more difficult to admit as evidence when there is a written document available. Who Can Amend the Contract? In most scenarios, a contract can only be amended if all parties who originally signed it unanimously agree to the proposed changes. This ensures that the fundamental spirit and intent of the contract are preserved, and no party can unilaterally impose changes without the others’ consent. However, in certain contracts, such as bank facility agreements, one party, often the bank, may be granted the authority to make changes without requiring the consent of the other party. This unilateral amendment power will be specified in the contract terms. When dealing with such contracts, it is important to carefully review the agreement to understand which party holds the authority to make alterations. Practical Steps to Amend a Contract: We will now outline a series of important steps you can take to effectively amend the contract: Review the original contract to identify the section or clause that needs modification. Communicate openly with the other party involved. Discuss the proposed changes, explain your reasons, and listen to their perspective. Sometimes, parties can come to a mutual agreement without making any changes to the contract. If all parties agree to the proposed changes, the next step is to document these changes in writing. As discussed above, an Addendum may be used to formally record the changes. Maintain records of all correspondence and documents related to the changes. These records may serve as evidence in the event of future disputes and offer clarity of the agreed-upon modifications. Be careful when making material changes to a contract. These are changes that substantially alter the original terms. In some cases, creating an entirely new contract may be wiser than amending the existing one. Contracts are designed to protect the legal interests of the contracting parties. When it comes to amending a signed contract, it requires careful consideration, open communication, and documentation. By following the steps outlined in this article, you can effectively navigate contract changes, ensuring the continued legal protection of your interest in commercial transactions.
