Alteration of Contract: Understanding the Basics
In the world of business, contracts are an essential tool to ensure that all parties involved understand their roles and responsibilities in a transaction. Contracts are often drafted with careful consideration of the details, terms, and conditions of the agreement. However, there are times when circumstances change, and one or both parties may want to make changes to an existing contract. This is where the concept of alteration of contract comes in.
What is Alteration of Contract?
Alteration of contract refers to the process of making changes to an existing contract after it has been signed by both parties. Alteration can include adding, deleting, or modifying terms and conditions of the agreement. The goal of making alterations is to ensure that the contract reflects the current understanding and agreement of both parties and to avoid any confusion or misunderstandings that may arise due to changes in circumstances.
Types of Alterations
Alterations can occur in two broad categories: unilateral alterations and mutual alterations. A unilateral alteration is when one party makes changes to the contract without the consent of the other party. A mutual alteration, on the other hand, is when both parties agree to make changes to the contract.
Unilateral Alteration
Unilateral alterations are generally considered invalid and unenforceable. This is because making changes to a contract without the consent of the other party goes against the fundamental principles of contract law, which require that both parties agree to the terms and conditions of the agreement.
However, there are some exceptions to this rule. For instance, if the contract explicitly grants the power to modify the agreement to one party, then they may have the legal authority to make changes without the other party`s consent. Alternatively, if the other party accepts or benefits from the unilateral alteration, it may be deemed as ratified or accepted and become enforceable.
Mutual Alteration
Mutual alterations are preferred to unilateral alterations because they are legally binding and enforceable. Both parties must agree to the changes, and the alterations must be made in writing and signed by the parties involved. Mutual alterations can be made in two ways: by an amendment or by a novation.
An Amendment is a change that modifies an existing term or condition of the agreement. It is typically used when the parties only want to change one or a few aspects of the contract.
A Novation, on the other hand, is a more comprehensive change to the contract that involves substituting one party with another. In a novation, the original contract is replaced by a new contract that reflects the new terms and conditions agreed upon by both parties.
In conclusion, alteration of contract is a necessary process that allows both parties to a contract to make changes that reflect the current understanding and agreement. It is important to remember that unilateral alterations are generally invalid, and the best approach is always to seek mutual agreement through an amendment or novation. Understanding the basics of alteration of contract can help you protect your interests and avoid potential legal disputes.