Despite the very best of intentions, when parties are rushing to complete a deal there is always the chance that there might be a mistake in the documents which only comes to light once everything has already been signed, sealed and delivered. For example, an individual may not have given the correct postcode or details of a document referred to may have been changed by the parties without them understanding the knock-on effect that would have on other documents.
So what do you do in that unfortunate situation? Is it safe to simply hand-amend the offending document?
There are some minor amendments that can be made without the consent of the parties to an agreement, for example, changes to correct typos that are immaterial and do not prejudice any of the parties. However, given the lack of hard and fast rules about what could be deemed to be material it is generally not considered to be a risk worth taking. It is more usual for solicitors to seek the consent of all parties and hand amend the document, either signing and dating the amendments with all of the parties’ consent or arranging for all of the parties to sign and date the amendment themselves. This method should put paid to any potential questions which may arise relating to when the change was made and under whose authority. A minor correction done in this way will not usually prevent the agreement from being enforceable.
Is it material?
If a material amendment has been made without the consent of all the parties, then this can result in the agreement being void, unless the change was not prejudicial to the party who didn’t sign up to it.
For instance, if a guarantee limit was reduced (improving the guarantors’ position) then the guarantee should still be binding on the guarantors even if only some of them had consented and signed up to the change. If, however, the limit were increased (meaning that the guarantors were in a worse position), then their lack of consent would mean that the guarantors who had not consented to the increase could be found to have no obligations under the guarantee whatsoever.
Whether or not guarantors who had agreed to the increase would continue to be bound by it would depend on the exact wording of the guarantee and whether they had only agreed on the understanding that all guarantors would be doing so.
The general consensus seems to be that an amendment is ‘material’ if it changes the business effect of the document, or is potentially prejudicial to a party to it.
Is it the same document?
Sometimes the amendment can be so significant it can be argued that the agreement is not even the same document. This is why the practice of parties signing signature pages that get attached to documents at a later date during ‘virtual completions’ has died out. In such circumstances the best remedy is usually to re-execute the agreement.
If the document being amended is security, then depending on the significance of the change, this could lead to a requirement to re-register the security.
Unless you are adding the date of signing or correcting a clear typo, steer clear of making any changes to an agreement without getting all of the parties to the document to sign up to it. But do not forget that all counterparts to an agreement should have the equivalent amendments made to them.
For any change that is more material or could prejudice one of the parties then it is best to enter into a deed of variation or an amendment agreement, and/or to ensure that clear consideration is provided to the party who ends up worse off as a result of the change.