Real Estate --- The Contract addendum

Addendum, amendment, addendum, amendment. Seems like a tongue twister right? Well the two terms mean completely different things. It’s important to understand what an addendum is because if you use the wrong word, it could change the course of your contract.

Let me first explain amendments. An amendment is an alteration of the original agreement. This can be any thing from price to when the seller vacates. For instance, an amendment can be used to during negotiations to counter an offer already made. An example would be the buyer has offered to pay X amount of money for the property with the following circumstances. Things like the kitchen appliances stay and so do the laundry room ones. The seller can add an amendment which states the washer is going but every thing else stays.

An addendum is part of the original contract. It is another section or part which is very specific in what it says. For instance if the buyer is making an offer on a farm, he or she may want to explain the terms in more detail. Terms like what is to happen to the crops already planted, or if any of the farm equipment stays can be clearly marked out in an addendum.

The addendum becomes part of a legal and binding contract. The amendments are parts of a contract still in negotiations. The addendum will stand up in court. The amendments will just show what everyone was considering. If you ever did have to go to court over the contract, it is a good idea to have both the final copy, with the addendum, and the rough draft with the amendments. It can give the judge a better idea of what was trying to be represented during the formulation of the contract.

A contract can have many addendums. Each one can be specific about certain aspects of the sale. Think of them as if then clauses. For instance, if the water supply in the well is not potable but safe for other uses, the buyer can state that the seller must drill a new well. The addendum can specify where the well is to go and who will drill it. Amendments can be made to an addendum which states, in this case, the well driller will determine where the well is to be placed.

Because an addendum is a legal and binding part of a contract, you must choose your wording carefully when adding it to the original contract. The addendum to a contract can include just about anything either party wants to clarify. It is crucial to realize the original contract should also incorporate wording such as “see attached addendum” or “addendum attached” so that there is no dispute later on should a question come up. There have been times the wording was not in the original contract and the addendums not attached to the documentation when a case was presented in court. This caused the courts some concern as to what was valid and what was not allowed. In the end, the addendum did help to win the case. However, if the single phrase “addendum attached” had been in the original contract there would have been no questions.
 

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