What is a Contract Addendum?
An addendum to a contract is a written document that adds, deletes or modifies one or more terms of a contract. Basically, the addendum describes how the parties are changing the original contract. The addendum is attached to the original agreement as an exhibit or schedule and becomes part of the contract. All parties to the original contract must consent to the changes in the addendum by signing the document. If the addendum fails to contain all required signatures of the parties, the enforceability of the modified contract could be challenged. Contract addendums must be executed by all parties to the original contract to be binding, whereas a unilateral contract amendment is only signed by the party who is amending the contract.
A contract addendum allows the parties to modify and reform their existing contract. In contrast , an amendment or modification to a contract is used to legally change or delete specific provisions in that same contract. For example, if an agreement or contract contains a binding provision to pay an existing debt for $10,000 and the parties later agree to modify the contract by reducing the debt obligation to $6,000, then a contract amendment is required to change the terms of the contract award. Conversely, if the parties agree to add a new term to the original contract such as an arbitration clause, then a contract addendum would be appropriate to add this new provision to the contract. As you can see, a contract addendum and contract amendment are used synonymously, yet each have a different function.
Requirements for a Contract Addendum in Florida
In the state of Florida, the legal requirements for an addendum are quite straightforward and follow a few key principles:
Parties Involved: The addendum must clearly identify the parties to the original contract. This ensures that there is no ambiguity as to who is agreeing to the added terms.
Clear and Concise Language: The language used in the addendum must be clear and concise. Vague or ambiguous terms can lead to later disputes over what the addendum was intended to modify in the underlying contract.
Reference to the Original Contract: The addendum must contain a reference to the original contract to which it pertains. Oftentimes, the addendum simply identifies the original contract by name and date.
Signatures: In Florida, it is not legally required for an addendum to be signed by all parties to the original contract, but it is strongly recommended. The signatures of both parties will protect the interests of all involved and reduce the likelihood of a later dispute.
Putting an addendum in writing is also important even though it is not legally required to do so. Florida law recognizes and enforces both oral and written contracts and contract modifications. A written addendum is more likely to hold up in court than one that is not.
Circumstances Commonly Covered by a Contract Addendum in Florida
In the realm of Florida contractual agreements, addendums serve a multitude of purposes. Sometimes, they are necessary to amend or supplement a purchase and sale contract in a real estate transaction. For example, if several months have elapsed from the time of the execution of the contract to the date of closing, there may be reason to add an addendum to update specific information such as the acquisition of a title insurance policy or a home warranty.
Similarly, addendums are often tacked onto existing business contracts to authorize amendments to terms or to provide additional detail on the particular business arrangement being entered into. Perhaps most commonly, Florida courts have repeatedly found that addendums may be utilized by residential consumers to become legally bound under contracts for goods or services. For instance, when some type of subcontractor or service provider is brought in as an ancillary to an existing contract, using an addendum to either the contract with the person securing services or the contract with the subcontractor is certainly not unusual.
Florida law provides that an addendum may also be used when the contracting parties wish to ratify and adopt an existing agreement and all of its terms and conditions. When parties choose to do so, the addendum should refer to the original contract and expressly confirm that it is the intent of the parties to be bound by the underlying contract twenty-seven if it is not otherwise valid and enforceable.
How to Create a Strong Addendum
First off, start by clearly referencing the original contract. The way to do that is to use a common typographical symbol called the section mark (§) or alternatively "Section 1, Paragraph 1" to give an example of the location of the relevant language in the original contract. This makes it easy for parties (and Judges, should it come to that) to cross reference the original contract to see the specific language being altered by the amendments in the addendum.
Second, always use clear and precise language. While you want to alter the original contract, that doesn’t mean you want to rewrite the entire document. Keeping in mind that the purpose of the addendum is only to alter the original contract, when including new legal language such as definitions or other substantive revisions, make sure to either specifically reference which section of the original contract you are amending or include qualifiers in the addendum that it is in addition to any provisions in the original document . The more specific you can be about which original contract language you are choosing to modify, and the clearer your language is about what the new proposed paragraph is providing, the more likely the amendment will be enforceable.
Third, use the same formatting. If the original document is single-spaced, make your addendum single spaced. If the original document utilizes a certain font and point size, replicate that in your addendum. It may seem silly, but these little details allow parties to easily see the amendments being made to the contract as separate and distinct from the original document, and will help in constructing a viable final copy which should be easy for everyone to understand.
Finally, take the time to get all parties on board with the proposed revision before drafting a formal final version. This means exchanging drafts of the addendum with the other party, discussing amendments, revisions, and deciding together what final language should be used. This will cut down on the risk of parties signing addendums they haven’t read and do not understand, once the contract is ultimately enforced.
How to Ensure the Enforceability of an Addendum
Addendums are generally enforceable under Florida law, provided that certain legal requirements are met. Dinan v. Capital Finance Mort. Corp., 55 So. 3d 603, 604 (Fla. 3d DCA 2011). Whether an addendum has been legally created is a fact-sensitive inquiry. Id. Therefore, it is critically important to ensure that the addendum is legally effective before relying on its terms. For example, an addendum which modifies a prior contract is ineffective if the prior contract was not valid to begin with. Id. Additionally, any required formalities must be satisfied. Id. While Florida law does not require that contracts be in writing, requires that so-called "contracts for the sale of land" be in writing and contain the "essential terms" of the alleged agreement. Lerea v. Green Acres, Inc., 572 So. 2d 952, 953 (Fla. 1st DCA 1990) (citing Powell v. Landis, 110 Fla. 91, 148 So. 691 (Fla. 1933)). Further, where a contract is required by statute to be in writing, an alleged modification of that contract must also comply with the statute of frauds. See Mendez v. Weiner, 69 So. 2d 326 (Fla. 1954) (discussing the Florida Statute of Frauds, now codified at section 725.01, Florida Statutes).
A party seeking to enforce an addendum created in connection with the sale, mortgage, or exchange of real property must prove that the terms of the written instrument are inconsistent with the terms of the original agreement. Lerea v. Green Acres, Inc., 572 So. 2d at 953. In the absence of written evidence of modification, the law holds that the original contract should control. Shadis v. Beal Bank, SSB, 916 So. 2d 806, 807 (Fla. 4th DCA 2005) (holding that the trial court erred in allowing an oral modification where the alleged modification was not in writing). Therefore, the best course of action is to supplement all contracts with a separate addendum that clearly describes what is to be modified. To avoid confusion, it is best to use an addendum that clearly indicates which parts of the contract are being superseded by the addendum. There are a number of different ways to create an addendum, depending on how much you wish to change the original contract. For example, if you are just adding traditional additional boilerplate contractual language into the contract, you can prepare a new document that includes the entire contract, but with the additional parts highlighted. In this case, it is extremely important that you indicate which sections are to be inserted and which sections are to be excluded. For example, you can mark the document to as: "Stricken text is to be excluded" for the provisions that are being superseded by the additional language of the addendum. You can also highlight the amended portions in red if you want to clearly emphasize which sections are being modified. Finally, it is extremely important to date, and initial, any modifications to the contract so that all parties are on notice of the changes, and to avoid disputes as to the actual date of the execution of the addendum.
FAQs About Addendums
Addendums are often viewed as an effective tool for addressing a variety of issues that arise in the course of contract performance. However, they can also become a source of significant controversy. For this reason, our attorneys frequently address the following questions:
Q: How does an addendum to a contract affect the original contract?
A: As addressed in the previous section, when parties enter into an addendum, they are typically altering the original contract terms. In many cases, this will include extending the initial term of the contract or altering the payment structure (such as interest rates, fees and related charges). Addendums may also be used to add new provisions to the original contract. Moreover, addendums may include important revisions to the original contract language, or the deletion of all or part of specific provisions.
Q: Can I challenge an addendum to a contract?
A: Depending on the specific facts of your situation, you may challenge an addendum to a contract via a declaratory action, a lawsuit for breach of contract, or by filing for specific performance. In a declaratory action, the court will issue a written opinion as to whether or not the addendum is enforceable or published as part of the original contract. In a suit for breach of contract, the injured party (either side) may seek damages before a civil court . A petition for specific performance allows the aggrieved party to ask for performance (or enforcement) of the original contract terms.
Q: What can I do if the other party refuses to carry out the terms of the contract addendum?
A: In many cases, the refusal to perform under the addendum is tantamount to a breach of contract. In such case, you may be able to initiate a lawsuit for breach of contract. While you may also be able to file a request for specific performance in order to force the other party to comply, pursuant to Section 672.716 of the Florida Statutes, a request for specific performance must first be presented by the court to the jury. The jury will then bring back a verdict and/or a recommendation on whether or not the court should order specific performance. A judge is not required to abide by this recommendation; however, the fact that the jury is given a role in specific performance shows it to be a somewhat involved process.
Q: Where can I find additional information about addendums in Florida?
A: Our experienced contract attorneys draft addendums to contracts and litigate contract disputes on a regular basis. We are often able to resolve these matters through negotiation. However, when this is not possible, we have a proven track record of providing positive results in the courtroom for our clients.
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