Two commonly used terms—addendum and amendment—are often misused and commonly mistaken as synonyms.
While they have similar applications, addendums and amendments are distinct components of the contract lifecycle management process.
In this article, we’ll shed light on the differences between amendments and addendums, helping you understand when to use one or the other.
Addendum vs. amendment: What’s the difference?
Addendum means addition (think “add”).
A contract addendum is an addition to the main agreement, designed to broaden or specify existing contract information without editing or changing the original terms and conditions.
As such, an addendum is a separate supplemental document (physical or digital) that is attached to the primary agreement.
Amendment, on the other hand, means to change or fix (think “mend”).
A contract amendment, therefore, is a modification to the existing terms of the agreement. This can range from a minor change in the wording of a single clause to a substantial change that completely alters the terms of the agreement.
So, amendments are not additional documents, as they simply edit the terms in the existing contract.
Also read: Ensuring Contract Version Control: Best Practices to Streamline Legal Operations
When would you need a contract addendum?
Contract addendums are used whenever you’d like to broaden or specify additional information related to the existing agreement without altering the terms of that agreement.
For instance, an addendum might be added to an existing employment contract to stipulate the company’s restrictions with regard to using AI tools like ChatGPT and thus have the employee agree to those new terms.
Also read: Rolling Out An Employment Agreement - Key Clauses
When would you need a contract amendment?
You would use a contract amendment any time you wish to alter the existing terms of an agreement rather than add to them.
For example, if you want to up your order quantity from 1,000 to 1,500 units.
What are the key differences between addendums and amendments?
There are three main differences to observe between amendments and addendums:
1. Purpose
The biggest difference between the two is their respective purpose.
Addendums are designed to supplement and extend existing agreements with additional information without changing any current terms or conditions.
Amendments are designed to change terms in the existing deal.
2. Authority to create
Addendums can be drafted by any party, though all legally responsible signing parties need to review and approve it before it can be enforced.
Amendments, on the other hand, can only be made by those who created and signed the initial contract or their legal representatives.
3. Method of creation
Lastly, there is a distinction in how addendums and amendments are created.
Addendums are always separate documents. They must be signed by the relevant parties and attached to the original document with a statement that the original agreement is only valid with said addendum attached.
To create an amendment, you have to edit the original contract. This involves striking out old clauses and substituting them with the new language. Then, all parties must sign off on the changes.
What are some common examples of amendments and addendums?
Common examples of amendments include the following:
- Changing the price of a purchase agreement
- Adjusting deadlines or shipping timeframes
- Increasing or reducing the quantity of a product purchase
- Adding or removing responsible parties
- Differences in enforceability
For addendums, here are some common examples:
- Adjusting a real estate contract to cover a new inspection contingency
- Adding a new disclosure to a partnership agreement
- Bringing on new partners to a business venture
- Changing an insurance agreement in light of new local legislation being passed
“With rapidly evolving technologies, the legal framework tends to lag behind. Whenever there is any amendment in a related regulation, you should be able to suggest necessary changes to the product team to ensure compliance.”
~ Juliette Thirsk, Head of Legal, Peach Payments
Streamlining Legal at a FinTech Startup
What’s the best software to use when making amendments and addendums?
If you’re creating amendments and addendums on a regular basis, you’re best off working in a dedicated contract lifecycle management platform.
Such tools—like SpotDraft—offer a number of important features for managing contract changes:
- In-platform redlining to facilitate amendment creation
- Time-saving automated workflows
- Contract templates and clause libraries to speed up addendum drafting
- Powerful contract data management and audit trails to keep track of document history
- An accessible contract repository to help you quickly locate agreements that need addendums or amendments
Also read: Contract Repository: Everything You Need to Know
The most ambitious brands turn to dedicated CLM management software to cater to their amendment and addendum needs. Here are some popular examples:
Also read: Contract Management Software: Essential Features Checklist
“The legal department is the last department of an enterprise business to be SaaS-ified. There's going to be new programs and software, and we're going to try to figure them out. But that software implementation part of legal ops is going to continue to increase and rise. I think it'll be interesting to see whether legal ops takes on some of the IT skill set or if it becomes a partnership with IT.”
~ Megan Niedermeyer, Chief Legal Officer, Apollo.io
Aligning Legal's Limitless Potential to Business Goals
Draft addendums and action amendments in SpotDraft
Have an urgent need to draft a contract addendum or convert redlined clauses into amendments?
Let us introduce you to SpotDraft, the contract life cycle management tool for teams of all sizes.
SpotDraft's end-to-end contract management platform is a CLM software that offers version control and an easily accessible environment that makes creating and editing contracts simple, including times when parties must make addendums and amendments.
Discover it for yourself: Request a demo here.
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