Once a contract is signed and sealed, it’s set in stone — or is it?
Things often change, and knowing how to write an addendum to a contract can be a valuable skill in many situations.
Let’s explore what an addendum to a contract is and how you can write one in 7 easy steps.
An addendum to a contract is a legally binding document that is added to an existing legal contract.
Once a contract is signed, it’s usually difficult to change it without invalidating it. An addendum avoids the need to create a whole new contract, allowing parties to introduce new clauses while keeping the original contract intact.
And since it’s legally binding, an addendum can alter any terms and conditions of the original contract.
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Many people confuse the terms contract addendum and contract amendment.
The difference between them lies in how they interact with the original contract:
Both amendments and addendums involve, and therefore must be agreed upon, by all parties to the contract in order to be valid.
While an addendum is its own document, its purpose is to update or correct an original contract.
As such, it should mirror that original document as much as possible.
Be sure to continually refer to the contract when drafting an addendum. In particular, consider the contract’s:
As far as possible, match all of these in the addendum.
That way, no parties should doubt that the addendum is as important — and as relevant — as other clauses of the contract.
Your addendum needs to clearly indicate what changes it makes and to which original contract. The first place you can do this is in your addendum title.
Give the addendum a title that references the original agreement’s name and date, and make it clear that it is indeed an addendum to that agreement.
For instance, perhaps you’re drafting an addendum to a residential lease agreement originally signed on the 1st of January 2021. Your addendum title might be:
“Addendum to Residential Lease Agreement Between [Your Name (owner)] and [Lessee’s Name (tenant)] of 1st January 2024.”
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As the title suggested above shows, it’s crucial to specify the parties — usually mirroring those listed in the original document. This ensures that everyone understands who is party to the addendum.
If a third party has an interest in the contract addendum, make sure to clearly mention their involvement.
Addenda update an existing agreement, so they usually refer to a specific part of the original contract.
You should cite the title of any clause an addendum relates to and use font styles like italics, bold, and strikethrough to make clear what’s being replaced or modified.
For instance, say you are writing an addendum to a car rental lease agreement to change details of the vehicle.
Part of your addendum may look like this:
Original “Identification of Rental Vehicle” element of the Agreement:
Model: Fiesta
VIN: 12345678
Color: Red
Year: 2020
Modifications proposed by this Addendum:
Model: Fiesta Focus
VIN: 12345678
Color: Red
Year: 2020
To ensure your addendum is fit for purpose and binding, it must not go against the original terms or requirements of the contract itself.
It should also comply with all laws and regulations in your jurisdiction.
It’s vital to check this before asking any parties to agree to the addendum.
As well as the details sketched out above, most addenda will need to include some other elements:
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Finally, it’s worth considering seeking the advice of a law firm or legal professional before you present the addendum to the relevant parties.
This could help you keep the addendum from falling foul of laws or regulations — even those you may not be aware of.
An addendum to a contract can be used in various scenarios. Let’s explore some.
Employment agreements can be lengthy documents, and it can often be the case that some clauses and details are left out either intentionally or unintentionally.
An addendum to an employment contract offers an opportunity to remedy such omissions or to add new details to remedy clauses in the original contract that may have been contentious.
A good example of a case when an addendum to an employment contract is needed is when the original contract’s clause regarding termination of employment only included death or employee resignation.
An addendum could be added later that also includes other grounds for termination, such as gross misconduct, breach of contract by the employee, or scenarios where the company is suffering financially and has to make compulsory redundancies.
Another type of contract that often needs addendums is a contract for insurance coverage.
There are many scenarios in which an addendum to an insurance contract may be required; for example, state laws regarding insurance sometimes undergo changes.
As well as factors directly related to insurance, there’s also the aspect of data protection.
An addendum may be needed to reflect changes to the regulatory framework and compliance requirements surrounding how a company handles a customer’s confidential information.
The real estate sector is one where there’s a frequent need for addendums to original contracts.
There are multiple scenarios where the details in the first signed agreement change and an addendum is needed to update them and keep the contract legally binding.
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Some of those scenarios include:
If problems arise, such as with the buyer’s financing or with the sale of the buyer’s own property, the buyer and seller can agree to an extension.
An agreement may be put in place so that full payment can be withheld until certain tasks are carried out by the seller.
The buyer may choose to add an inspection contingency addendum so that if any inspection reveals issues with the property, they can withdraw from the sale or request that the issues be resolved.
In some cases, such as with developers, the seller may agree to grant the buyer a mortgage.
A contract addendum could include all details of such financing, such as the repayment period and monthly payments.
If the seller of a property owes more money on it than the current market value, this addendum directs the seller to field offers on the property but also to seek their creditor’s consent to accept an offer.
This addendum type may be needed when there’s a mutual agreement to cancel the sales contract and recognizes that neither party holds the other at fault.
It may also cover details regarding the return of a deposit and when that return should take place.
Writing an addendum can sound like a complicated process, but it doesn’t have to be.
And while you may want to use an attorney for more complicated addendums, in most cases, creating an addendum is an exercise you can carry out yourself as long as you’re aware of what an addendum to a contract should look like.
What can make the process even easier is using a contract addendum template from PandaDoc. It can be used in any scenario where one or more parties want to change certain details of the original contract.
A great benefit of using one of our templates is that it takes care of all the tricky legalese that is needed in such documents and allows you to focus on the details you need to change or rectify.
While a template removes the need for legal expertise, you may still have to double-check some details, such as compliance with relevant laws.
By following the guidelines above and ensuring that all changes have been agreed upon, you’ll find that what could be a complicated process is extremely simple, and can be accomplished without an in-depth knowledge of contract law. Whether adding an addendum to an employment contract or adding new terms agreed upon with a client, PandaDoc makes it as easy as A, B, C.
PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDoc services are governed by our Terms of Use and Privacy Policy.
Originally published January 10, 2023, updated August 5, 2024
Olga Asheychik Senior Web Analytics Manager at PandaDoc
Olga is a Senior Web Analytics Manager at PandaDoc who has been working in the Digital Marketing field for the past 15 years. Olga had roles driving marketing campaigns in document automation, contracts, invoices, and agreements. In her daily life, she is a big fan of traveling and connecting with new people.
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