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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 modification 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 conditions. Things
like the kitchen appliances stay and so do the laundry room ones. The seller
can put in 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 clarify 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 present what everyone was thinking. 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 choose where the
well is to be placed.
Because an addendum is a legal and binding part of a contract, you must
select 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 essential 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 brought in court. This
caused the courts some concern as to what was valid and what was not
acceptable. 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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