It is essential to enter a well-drafted contract when forming a new commercial relationship or embarking on a new business endeavour. However, sometimes you might need to change or vary a business contract once you have already agreed to its terms. How you go about altering the contract will depend on the issue that is motivating the amendment. This article will detail some of the circumstances that may cause you to change or amend a business contract, and outline how you can make a variation. 

Common Reasons to Amend Your Contract

Before you change a contract, you and the other contracting parties must understand why you need to amend it. It may be because:

  • you and the other parties involved wish to change your contractual obligations. For example, you may want to increase or decrease the quota of goods you are to provide under the contract by adding a new clause;
  • the written contract wrongly records the shared agreement you made with the other parties; 
  • you wish to assign your contractual benefits to a third party; or
  • a mistake induced your entry into the contract. 

How to Amend Your Contract to Change Your Obligations

If you, or the other parties you are contracting with, wish to change any responsibilities contained in the contract, you are entitled to do so. However, all parties must:

  • express an intention to vary the terms of the agreement;
  • put this amendment to the original document into writing (if the original contract was required to be in writing); and 
  • provide something of value (consideration) to support any new obligations or promises made. This consideration must be over and above any existing contractual obligations. For example, if you wish to increase the quota of goods you are supplying under a contract, the party receiving these goods must agree to increase the payment amount. 

It is best practice to understand the contents of your contract. Some contracts may have a provision that details how an amendment to the contract should occur. For example, some contracts have a “no oral variation” clause. This means that any changes to the contract cannot occur orally. If you were to vary a contract that contained such a clause, these oral changes to the original agreement would not be enforceable. 

How to Claim Rectification

Sometimes a written contract may differ from the actual agreement that was made between you and the other contracting parties. This may be due to errors made when the contract was being typed out or copied. If such a discrepancy does occur, you could claim the remedy of rectification. Rectification allows a court to amend the terms of a written contract to reflect the contracting parties’ common intention.

To claim rectification, you must demonstrate that:

  • the contractual document is incorrect; and 
  • that there existed an agreement in different terms. 

In assessing what this common intention is, a court may look to you and the other parties’ actions to see whether or not their actions indicate this common agreement. Suppose one party to your contract is a larger corporate entity. In that case, a court will determine whether the common intention was held by the person(s) within the entity who can represent the ‘mind’ of the company. 

Rectification is likely to be available for simple clerical errors, such as the contract wrongly recording one of the contracting parties’ names. 

How to Assign Your Contract

If you wish to assign your contractual benefits to a third party, you can do this by changing the contract, or entering into a deed of assignment. Such a change can occur without the consent of the other contracting parties. 

However, this change to the contract can only be for contractual benefits. You cannot assign any contractual obligations to a third party. This would require a novation, which would cause your existing contract to be replaced by another. Furthermore, there may be a term in your contract that prevents assignment from occurring. Make sure that you are familiar with the contents of the document before engaging in an assignment. 

How to Amend Your Contract Due to a Mistake 

You may wish to amend a contract because you, or another contracting party, made a mistake before, or when entering that contract. This mistake could be about a matter of fact or a matter of law. 

To vary a contract, you must demonstrate that your mistake was either a:

  • known, unilateral mistake. This means that you made a mistake which influenced your entry into the contract, and the other party knew of this mistake. For example, if you made a mistake as to what piece of land you would be buying, and the other contracting party knew you had made this mistake; 
  • common mistake. This is when all of the parties were influenced to enter into the contract by the same mistake; or
  • mutual mistake. This is more difficult to demonstrate. A mutual mistake means that you and the other party were both influenced to enter into the contract by a different mistake about the same matter of fact or law. An example of a mutual mistake would be if you owned three plots of land (A, B and C), and you intended to sell lot A and the buyer intended to purchase lot B, whilst the written document provided for the sale and purchase of lot C. 

In conjunction with this, you must demonstrate that your mistake resulted in a disproportionate exchange of values or benefits between you and the other parties and that a term of the contract does not force you to assume the risk for any mistake you make. 

If you are successful in demonstrating these criteria, a court can change the contract to:

  • reflect what you mistakenly thought the contract provided for; or 
  • ensure the contract is fair and reasonable. 

Key Takeaways

It is not uncommon to change or amend a business contract once you have entered into it. However, how you go about varying the contract will depend on why you are making these changes. You must be aware of why you want to change the contract, before varying it. Furthermore, you should be completely aware of the contents of your contract. This is because a clause may impact how you can vary the contract, or whether you can amend it at all for your intended purpose.

If you wish to amend your business contract, LegalVision’s contract lawyers can help. Contact us on 0800 005 570 or complete the form on this page. 

FAQs

What is it called when you make changes to a contract?

Making changes to a contract is also known as amending or varying your contract. 

How do you amend a contract?

How you amend a contract depends on why you want to change the document. Usually, you can amend a contract by an agreement with your other contracting parties.

Are amendments legally binding?

If done correctly, amendments made to a contract are legally binding and enforceable.

How do you correct a contract?

If your contract does not correctly represent an agreement you have made, you can use the remedy of rectification to correct it.

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