What is an Addendum [with Examples]
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Addendums are used to edit the terms of a contract so parties do not need to create a new one from scratch. The International Association for Contract and Commercial Management (IACCM) states that over 70% of contracts need addendums at some point in their lifecycle journey. It’s a natural process since project scopes often evolve, and business needs always change to meet new goals.
For this reason, addendums are common resources in the business world, specifically in contract management circles. So, join us in the article below to learn about addendums and how to create them quickly with no-code software.
Let’s get started!
What is an Addendum to a Contract?
An addendum is a separate document added to a contract to modify or clarify the terms of the agreement. Additionally, addendums can serve the purpose of adding new terms to a contract. Therefore, addendums are essential when parties need to change an existing contract without terminating the original document.
Like the contract, an addendum needs to be signed by all parties in an agreement to make it legally binding.
What is Gap Addendum?
This document is used in loan and lease agreements, which are common aids for vehicle financing. For example, when a car is stolen or damaged in an accident, insurance covers the gap between what the driver owes and its cash value. However, most insurance policies only pay out the market value of a car.
Sometimes, this value is less than the remaining car loan balance. Therefore, a gap addendum is used to cover that remaining loan amount. But what about other types of gap addendums?
A common question we get asked along with the one above is, “What is an appraisal gap addendum?” It’s a clause typically found in real estate agreements and discusses a home’s appraised value when it is lower than the seller’s asking price. The contract needs this clause because it explains how the buyer and seller will handle this situation.
An appraisal gap addendum is common in locations where buyers want to pay more than the appraised value of a property. This is a common practice when the buyer wants to secure the purchase of a house in a competitive market.
What is the Difference Between an Amendment and an Addendum?
Amendments and addendums have distinct purposes and are used at different times. Partnerships use amendments to change the terms within a contract after it has been approved and signed. An amendment aims to change sections of the contract with the approval of all parties involved.
Alternatively, addendums add new terms to a contract without voiding the original and creating a new one. An addendum is, therefore, a supplementary document containing extra details about the agreement, signed and approved by all parties.
What Does an Addendum Look Like?
An addendum adds new terms to an existing contract. Here is an addendum example for you to check out.
Where Does an Addendum Go in a Document?
A signed addendum is attached to the end of an existing document—not just any document, but the one it will modify or add terms to. An addendum is referenced in the main document to ensure all parties know it exists.
Titan for Generating Contracts and Addendums
Do you want to save time when it comes to creating and delivering contracts, addendums, or any business document? Manually copying data from a powerful CRM platform like Salesforce and pasting it into contracts can be a sluggish process.
Titan can help you recover time with no-code software to build and generate documents from Salesforce. When you use premium software like Titan, you get to manage contracts with consistency across all business teams and channels while eliminating any errors that usually crop up from copy-pasting tasks.
If you want contracts and addendums to have accurate data, terms, and clauses pulled from Salesforce, we recommend you check out Titan. Here are a few of our features that can make your contract lifecycle management processes faster:
An All-in-One Solution for Salesforce Experiences
Thanks for reading our article on addendums. We covered what they are and how to fully automate your contract lifecycle journey with no code. However, our short list is just the beginning of what you can do when signing up for Titan and integrating it with Salesforce. For a full feature breakdown of our CLM app or any other product, please contact us through one of our social media channels below.
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Disclaimer: The comparisons listed in this article are based on information provided by the companies online and online reviews from users. If you found a mistake, please contact us.
Frequently Asked Questions
What is addendum signing?
It’s a process where all the parties involved in an agreement sign the addendum document attached to a contract. The addendum will include the new terms and changes that affect the original agreement.
Is an addendum legally binding?
An addendum must be signed by all the parties in an agreement for it to be considered a legally binding document.
What is an addendum report?
It’s a supplement to an original report. In an addendum report, the reader can access further details or view updates to the original document. The purpose of an addendum report is to make the original report clearer or to add new information to the document.
When should an addendum be used?
It should be used when you want to do the following to an existing contract:
- Modify
- Add New Terms
- Clarify
An addendum will help you bypass the task of editing the original document. Businesses use addendums when they want to:
- Add Provisions to an Agreement
- Correct Errors found in the Original Contract
- Update Details that Have Already Been Signed Off
