In general, the law defines the word “contract” as a legally binding agreement made between two or more parties that outlines the rights and duties governing their arrangement. Contracts can be created through either an oral or written agreement. Regardless of the form that a contract takes (e.g., oral versus written), a contract can usually be modified at a future date.
A contract modification refers to a situation where the contracting parties agree to change the terms of their original agreement. For example, when a person receives a job offer, the hiring company may require them to sign an employment contract. If the person stays at the company long enough to get a promotion, then they may sign a modified employment contract that includes their new job title and any salary increases.
Depending on the needs of the parties, a contract may be modified in whole or in part. Modifications can also be made after a contract is executed or even before a contract is signed. Whether a partial or entire modification takes place before or after a contract is signed, all parties must agree to any changes or else the modification will not be considered valid.
If one or more of the parties do not agree to the changes being made to a contract, then the contract will most likely be found to be invalid and unenforceable. According to standard contract laws, only modifications that are valid will be legally enforceable and binding on the parties.
Thus, if you are a party to a contract and need to modify your agreement, you should speak to a local contract attorney to ensure your changes will be valid and binding on all parties.
Why Might Contract Modification Be Necessary?
There are numerous reasons as to why contracting parties would want to modify a contract. Some common reasons that parties may decide to modify a contract include:
- To shorten or extend the duration of the contract;
- To alter the quantity or price of items covered under the contract;
- To add or subtract the types of goods in the contract;
- To change specific terms, such as the method of payment, delivery, or receipt of a service or product; and
- Various other scenarios that may give rise to modify a contract (e.g., a product in the contract is discontinued).
In addition, an alteration of contract may also need to happen for reasons outside of the parties’ control. For instance, it may be necessary to modify the terms of a contract if a newly passed regulation would make those terms or the contract itself illegal. In some cases, a judge may order a contract to be modified if it helps to resolve a dispute over the contract or some of its terms.
Accordingly, not every contract modification is based on the desires of the parties. Some changes may be legally required. Hence, why there are so many reasons why the alteration of a contract might be necessary.
When Can a Contract Be Modified?
In general, a contract can typically be modified at any point during the arrangement, so long as all parties to the contract consent to the changes being made. If the changes to a contract are minor, the parties may simply handwrite them on the original document and sign or initial their names next to the new amendment.
If a contract requires major changes, however, the contract may need to be renegotiated or possibly replaced before the modified version is signed. In addition, if the contract contains any provisions informing the parties on what to do in the event of a modification, they must follow these terms to the letter.
Aside from technical aspects and the requirement that all parties provide consent for a modification, contract changes must also adhere to the necessary legal procedures. The majority of contract laws and their requirements can be found in state statutes.
There are also three laws in particular that parties modifying a contract should review before making any changes. These include the Uniform Commercial Code (“UCC”), the Statute of Frauds (“SOF”), and common law contract principles. Most of these laws have been adopted by states who have then gone on to create their own interpretations. Whether these laws apply will depend on a specific situation.
For example, a contract that involves the sale of goods and a merchant will be governed by the UCC. Parties attempting to modify a contract under the rules of the UCC only need to show that they are doing so in good faith.
In contrast, contracts between non-merchants or for services are usually governed by common law contract principles. Thus, under common law rules, parties who wish to modify a contract will need to provide new consideration (i.e., something of value).
Lastly, if a contract or a modification is controlled by the SOF, then any changes must be made in compliance with those rules as well. For instance, if a contract was originally created orally, but the modification would increase the value of the contract by $500 or more, then the parties must write down the new changes. Otherwise, those changes will not be considered legally valid or enforceable.
When Is Contract Modification Not Allowed?
There are some scenarios in which contract modification will not be allowed. For example, if a contract contains language that prohibits future modifications of the contract, then neither party can consent to any changes. Instead, the parties will either need to form a new agreement, cancel that provision of the contract, or add an amendment that specifies special circumstances for modifications.
Also, as previously mentioned, contract modification is not allowed if it is illegal, would invalidate the contract, or when one or more of the parties does not consent to the changes. When all parties fail to give permission to modify a contract, then contract modification is not allowed and any subsequent modifications will be invalidated.
What Happens When Contract is Modified Without Consent?
As discussed above, changing a contract without notice or modifying a contract without the consent of the other parties will render those changes null and void. Depending on how significant the modifications were, it may also have the effect of invalidating the contract in its entirety.
Thus, if a party fails to give notice or get permission from the other parties and proceeds to make material changes to the contract, those changes will most likely be unenforceable.
In some cases, changing a contract without notice can result in a breach of contract. The non-breaching party will then be able to sue the breaching party for damages under the terms of the original contract. Therefore, it is very important that all parties provide consent to any changes being made to a contract or else there could be serious legal consequences.
Do I need a Lawyer for Modifying a Contract?
Contract modification can be a confusing process. There are many detailed procedures that must be followed to ensure that a modification is legally valid. Also, laws concerning contracts tend to vary widely by state. Thus, if you have any questions or need assistance with modifying a contract, it may be in your best interest to contact a local contract lawyer for further guidance.
An experienced contract lawyer can make sure that you are properly adhering to the applicable modification guidelines, can help you draft and review any necessary changes being made to your contract, and can negotiate with opposing counsel for new terms that would be in your favor. Additionally, if you need to draft a new contract because the changes would be substantial, your lawyer will be able to assist you with this process as well.