DEED OF ADHERENCE v. ADDENDUM

Commercial transactions may often necessitate the introduction of new elements to an already executed contract - these elements could be an alteration or modification of contract terms or the inclusion of an additional party.

These modifications could arise due to changes in market conditions, business needs, legal developments, or unforeseen circumstances. While contracts are typically designed to provide certainty and a clear framework for obligations, there are numerous scenarios where the introduction of new terms becomes essential.

For example, as a businesses evolve, their operational needs may change, necessitating contract modifications. A company might require additional funding to expand its operations. If the company chooses equity over debt as a financing method, when a new shareholder buys into the company, the existing shareholders may already have an agreement that governs their relationship. The new shareholder needs to agree to the terms of that agreement, and the Deed of Adherence formally binds him/her to those terms.

Similarly, legal and regulatory changes are another reason commercial parties may need to introduce new elements to a contract. Government regulations, tax laws, or industry standards may change, rendering certain terms unenforceable or impractical. For instance, new data protection laws may require the introduction of clauses related to compliance with data privacy standards, which were not contemplated at the time the contract was originally executed.

In a contract of supply, a party may need to alter the scope of services or delivery terms - such modifications allow the contract to stay relevant and accommodate the evolving needs of the parties involved. A situation such as this as well the afore-mentioned, will require an addendum to the existing contract.

• Deed of Adherence: Adds a new party to an agreement without changing the terms.
• Addendum: Changes the terms of an agreement between the original parties.

If you're adding new parties (like shareholders or partners) without renegotiating the entire agreement, a Deed of Adherence is the tool to use. If you're changing the terms or scope of the agreement itself, an Addendum is appropriate.

I am a #commerciallawyer based in Lagos, Nigeria with a passion for writing and speaking on contract law. I am committed to educating others and offering expert advice on the intricacies of commercial agreements. You can reach me here: Hilda@htlegaladvisory.in