Variations v Side Letters v Addendums

Got a contract that needs a tweak? That's totally normal! Commercial life changes fast, and sometimes your agreements need to keep up. But before you scribble a note on the back of a napkin or fire off a quick email, you need to know how to legally change your contract.

For small business owners, the jargon can be confusing. Are you using a variation, a side letter, or an addendum? Choosing the wrong tool can lead to confusion, disputes, or even make the change unenforceable.

Let's break down these three key methods for updating or clarifying your contracts, making it super easy to know which one to reach for!

Commercial life changes fast, and sometimes your agreements need to keep up

🔨 1. Contract Variation: The Renovation

A contract variation (sometimes called an amendment) is the most formal way to change the actual terms and conditions within the main body of your existing contract.

What it is:

A formal, written agreement between all parties to change, delete, or replace specific clauses in the original contract.

When to use it:

• The fundamental deal is changing: You're modifying core terms like the price, the deadline, the scope of work, or payment schedule.

  
  

• You need iron-clad certainty: The change is significant, high-value, or likely to be scrutinised (e.g., changing the entire delivery timeline for a project).

  
  

• The original contract requires it: Most well-drafted contracts will have a variation clause, which typically dictates that any change must be in writing and signed by all parties.

Actionable Guidance:

The document should clearly reference the specific clauses being changed. For example: "Clause 4.1 (Price) shall be deleted in its entirety and replaced with the following:...". Crucially, a Deed of Variation or an Agreement to Vary a Contract must be signed by all parties to be legally binding.

📝 2. Addendum: The Extension

An addendum is used to introduce new terms, conditions, or documents to the contract without changing the existing clauses. It's like adding a new chapter at the end of a book.

What it is:

A document that adds something new to the contract, often a detailed list or a specification that wasn't ready when the original agreement was signed. It becomes a formal, binding part of the overall contract.

When to use it:

• To include specifications or details: You've signed the main service agreement, but now you need to attach the detailed "Scope of Work" document.

  
  

• To formalize a new obligation: You need to add a completely new task or requirement that wasn't covered before (e.g., adding a new service to an existing maintenance contract).

  
  

• To attach missing documents: The original contract referenced an Exhibit or Schedule that didn't exist at the time of signing.

Actionable Guidance:

An addendum must clearly specify which provisions in the main contract it relates to. Again, an addendum must be signed by all parties to be legally binding and often includes a line like: "This Addendum shall be incorporated into and form part of the Agreement dated [Date]."

✉️ 3. Side Letter: The Redecoration

The side letter is the trickiest of the trio and should be used with caution. It is a separate, signed agreement that clarifies or modifies certain points of the main contract, without formally amending the main contract itself.

What it is:

A side letter typically clarifies an ambiguous clause in the main contract or records an informal understanding about how a specific clause will be interpreted or sets out a specific and temporary exception to a clause.

When to use it:

• Tactical or temporary adjustments: You want to temporarily waive a strict deadline for one delivery without formally changing the entire delivery clause in the master agreement.

  
  

• Sensitive issues: You need to record an understanding that might be commercially sensitive and you don't want it to be visible to third parties who may need to see the main contract.

Actionable Guidance:

Side letters should be explicit that they are intended to be legally binding and that they are intended to override specific parts of the main agreement only in the manner described. If you use one, always consult a legal professional to ensure it doesn't inadvertently amend other parts of your main agreement.

Wrapping it up

Navigating the world of commercial contracts doesn't have to be intimidating! The key takeaway here is that when your business relationship evolves, your legal documentation must keep pace. Using the right tool ensures that your agreements remain clear, enforceable, and fully reflect the commercial reality of your business partnerships. If you're ever in doubt, we're here to help!