Amendment clauses in contracts

by Dell C. "D. C." Toedt III on 2009-09-03

Table of Contents

“Amendments must be in writing” requirements might be unenforceable
Stray communications — such as IM messages — might be held to constitute “amendments”
Written-amendment requirements might be validated by statute
Further reading

“Amendments must be in writing” requirements might be unenforceable

Many contracts contain a general-provisions clause to the effect that all amendments to the agreement must be in writing. In some jurisdictions, though, the presence of such a clause will not necessarily end a dispute whether an agreement was amended orally. It takes just a bit of legal gymnastics to get there, but in a given case, a court might conclude that the parties to the written contract subsequently made a valid, enforceable, oral agreement to waive or modify the requirement that amendments be in writing. As then-Judge (later Justice) Cardozo said in a 1919 New York case:

Those who make a contract, may unmake it. The clause which forbids a change may be changed like any other. The prohibition of oral waiver, may itself be waived. Every such agreement is ended by the new one which contradicts it . . . What is excluded by one act, is restored by another. You may put it out by the door, it is back through the window. Whenever two men contract, no limitation self-imposed can destroy their power to contract again.

Beatty v Guggenheim Exploration Co., 225 N.Y. 380, 387-88 (1919), quoted in in Israel v. Chabra, 12 N.Y.3d 158, 163-64 (2009) (internal citations and quotation marks omitted).

In a case involving Shell Oil Company, a group of dealers claimed that Shell had orally represented that a rent subsidy would not be terminated except in a situation such as a war or an oil embargo.

When Shell’s successor terminated the subsidy, the dealers sued, arguing successfully that Shell’s alleged oral representations had the effect of amending the franchise agreement, even though the agreement had an integration (‘entire agreement’) clause.
The appeals court affirmed; it cited Massachusetts law to the effect that “the question of integration is one of fact reserved for the trial judge, whose resolution of that issue will not be reversed unless clearly erroneous.” Marcoux v. Shell Oil Prods. Co. LLC, 524 F.3d 33 (1st Cir. 2008) (citation and internal quotation marks omitted).

Stray communications — such as IM messages — might be held to constitute “amendments”

A well-drafted amendment clause might require any amendment to the agreement to expressly refer to the agreement. That could help avoid later claims that “stray” language constitutes an amendment.

For an example of why this might be needed, see Stevens v. Publicis, S.A., 2008 NY Slip Op 02880 [50 AD3d 253]: A New York appellate court held that an exchange of emails, in which each email included the typed name of the sender at the bottom of the message was sufficient to modify an employment agreement. See also Alix R. Rubin, Entwistle & Cappucci LLP, Counsel Beware: A Few Keystrokes May Modify An Agreement (accessed July 18, 2008).

And in a 2011 case, a federal district court held that a day-long instant-messaging (“IM”) conversation was sufficient to modify the compensation arrangements in a Web-based affiliate marketing agreement. CX Digital Media, Inc. v. Smoking Everywhere, Inc., No. 09-62020 (S.D. Fla. Mar. 23, 2011) (entering judgment for plaintiff affiliate-marketing firm).

Written-amendment requirements might be validated by statute

Uniform Commercial Code: In contracts for the sales of goods, section 2-202(2) of the Uniform Commercial Code provides that “[a] signed agreement which [sic] excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.” (Emphasis added.)

New York: In New York, General Obligations Law § 15-301(1) provides that:

A written agreement or other written instrument which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the change is sought or by his agent.

For a discussion of the history of this statute, see the opinion of the Court of Appeals of New York (that state’s highest court) in Israel v. Chabra, 12 N.Y.3d 158, 163-67 (2009) (on certification to the Second Circuit).

Amendment clauses in contracts

Table of contents

“Amendments must be in writing” requirements might be unenforceable

Stray communications — such as IM messages — might be held to constitute “amendments”

Written-amendment requirements might be validated by statute

Further reading