Introduction
Amendment refers to alteration or addition to any contract, agreement, laws, and regulations. An amendment can also be made by way of an addendum or modification are made to some of the terms of an agreement or contract. In case there are substantial changes, the existing agreement or contract may need to be substituted with a new one.
Understanding Amendment
An amendment is required to add any terms to an existing agreement or contract. The addition may be for any omission in terms of a contract, for correcting a misstatement, or could be for a substitution of the terms of a contract.
Examples of changes include a change in the place of execution of the contract, adding a clause for the appointment of an arbitrator.
An amendment must not alter the substance of an agreement, nature, and the actual purpose of the agreement. An amendment may change the price or extend the deadline. There may be additions or corrections to an existing agreement or contract. The other portions remain intact and in force.
In case of substantial amendments which involve a change in ownership, names of parties to a contract, alteration of the objects, the old agreement or contract cannot be amended and approved. Substantial amendments require a new contract or agreement. The old contract or agreement will stand withdrawn.
The parties of an agreement or contract may need to comply with the regulations and law applicable to them. They may need to have the agreement or contract stamped under the law. The parties may have to affix their signatures in the presence of witnesses. They may also need to make filings with the regulatory authorities.
For example, companies and LLPs (Limited Liability Partnerships) need to update changes to their Memorandum and Articles of Association with the Registrar of Companies in India.
Amendments may also include changes to financial statements for material corrections. There may be corresponding amendments to audit reports.
Conclusion
The parties to an agreement or contract may need to carry out amendments for corrections or for material omissions. Amendments are required to understand the current status of business transactions, updated financial position, and keep the interests of all stakeholders. Further, amendments should be disclosed and reported under the applicable laws and regulations.
