Mutual agreement addendums are used to modify existing agreements. Unfortunately, the same form with the same three checkboxes is used as is used to make an addendum to an offer or counter offer. The potential confusion is exacerbated by the practice of using the name “sale agreement” for both the buyer’s offer and the resulting contract once there is acceptance. Basically, rather than agreements to modify and additional terms forms, one “addendum” form is used for both uses.

Because the use is not clear from the content of the form, only the context in which the form is used tells you what it is. When used to make modifications to an existing contract, mutual agreement addendums do not normally affect the formation, validity or enforceability of the underlying contract. Typically, mutual agreement addendums propose a modification that may be accepted or rejected by the other party without calling into question the existing agreement between the parties.

Like everything else in law, there are exceptions to the general rule that requests for modification of an existing contract has no affect on the contract itself. When it comes to modifications of existing contracts, the exception that is implicated is created by the doctrine of repudiation. Repudiation is a positive statement refusing to perform an otherwise binding agreement. Repudiation raises the issues of anticipatory breach of contract. Click here for a detailed discussion of anticipatory breach issues.

Under the doctrine of anticipatory breach, a positive statement of intent not to perform a contract can sometimes be considered a material breach excusing the other party’s duty to perform the contract. This arcane legal doctrine is probably at the bottom of one of the most ill-founded and long-running real estate myths ever to appear. That myth is that a request for repairs made through a mutual agreement addendum is somehow a “counter offer” which, if the seller “rejects,” ends the transaction.

An addendum to an already formed contract, requesting repairs or anything else, is not going to affect the underlying contract except under the most unusual of circumstances. Instead, a mutual agreement addendum is simply a request to modify the terms of the contract. The other party to such a request is, of course, free to reject the request. They can counter with different or additional terms; all without having any affect upon the existing agreement. In that sense, but only in that sense, it is like offer and acceptance. What you are looking for is a meeting of the minds – not on the contract – but on the modification itself.

Because proposing changes to an existing contract is like offer and acceptance, all the problems associated with offer and acceptance apply. Click here for a detailed explanation of contract formation. So, for instance, if the buyer sends the seller an addendum proposing new terms and the seller accepts the addendum by signing it, but also crosses out one of the terms, you have acceptance varying the terms of an offer or a counter offer. Single signature problems, grumbling assent and all the rest of the problems that can arise in offer and acceptance can arise in mutual agreement addendums.

The key, as with formation addendums, is to always understand the context in which an addendum form is being used. Here, that context is a request for modification. Don’t think generically: “addendum.” Think contextually: additional terms to offer or modification request. In that way, many of the problems associated with the use of generic “addendum” forms can be avoided.
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