As businesspersons, we amend contracts when they require minor changes, based on a subsequent agreement by the parties. Rather than rewriting the entire contract, it is usually more convenient to memorialize the new understanding with a simple amendment (see Amending an Existing Contract and Sample Amendment to Contract). However, there are times when an amendment would be either inefficient, impractical, or confusing. In these instances, it is preferable to fully amend and restate the original agreement (sometimes called the existing agreement, the prior agreement, or something similar).
The appeal of using amendments to modify agreements is that they usually require minimal effort and negotiation and can be signed by the parties fairly quickly. Another benefit is that you can repeatedly use an indefinite number of amendments to modify your original agreement. The problem with this approach is that numerous amendments — which can result in multiple changes, additions, and deletions to the existing agreement — can either create conflicting provisions or make the document too difficult to understand. In other words, too many amendments eventually make it challenging to properly determine the full legal import of the agreement because any reading of the original contract must always take into account all subsequent modifications. This becomes problematic, because the more amendments that exist, the more likely that the parties involved will either forget or misunderstand prior changes to the contract. While there is no set rule as to when an amended and restated agreement (an A&R Agreement) would be preferable to adding just one more amendment, this usually happens when you tell yourself, “It would be much less confusing if we had all of this stuff combined into just one document again.” At that moment, you should suggest to the other contract party that it probably makes more sense to incorporate the newest proposed amendments into an A&R Agreement, using the suggestions below.
Ideally, you should have a corporate attorney handle any negotiations, revisions, or restatements of your business contracts. That being said, whether it is you or your counsel who’ll be preparing the A&R Agreement, the first step is to carefully read through the entirety of the original agreement and each subsequent amendment, including all attachments (see How to Effectively Use Schedules, Exhibits, and Addendums in Your Contracts). This will give you a fresh recollection as to all of the changes that have been made along the way and will facilitate the next step of actually putting pen to paper.
Creating an A&R Agreement is like replacing your smart phone with a newer version, including all the upgrades. When either you or your legal counsel is prepared to draft the A&R Agreement, start with the original document and then modify it with every change described in each successive amendment. Admittedly, this can be a painstaking task that can result in the modification, addition, or removal of various provisions multiple times (depending on the number and scope of the existing amendments), but this process is the only way to ensure that your final product properly reflects the agreement as it exists to date, in one document.
Note that you must add the phrase “Amended and Restated” to the title of the A&R Agreement in all relevant places. Also, the recitals to the A&R Agreement should describe and define the original agreement (including the background, date, and original parties) and further describe the evolution of each iteration of the amendment process through present day. Here is an example:
WHEREAS, the Parties entered into that certain [Name of Original Agreement], dated as of [_______________, 20__], for the purposes of [___________________________] (the "Original Agreement");
WHEREAS, the Parties entered into that certain First Amendment to [Name of Original Agreement], dated as of [_______________, 20__] (the "First Amendment");
WHEREAS, the Parties entered into that certain Second Amendment to [Name of Original Agreement], dated as of [_______________, 20__] (the "Second Amendment");
WHEREAS, the Parties entered into that certain Third Amendment to [Name of Original Agreement], dated as of [_______________, 20__] (the "Third Amendment", and together with the First Amendment and the Second Amendment, the “Amendments”);
WHEREAS, the Parties desire to amend and restate the Original Agreement in its entirety, together with all Amendments; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:
Now you should have one, consolidated document that properly reflects all of the terms and conditions that the parties have agreed to thus far, pursuant to the prior amendments. Your next task is to modify your draft of the A&R Agreement to incorporate the newest changes that the parties have agreed to.
At this point, you should have a draft of a fully-updated A&R Agreement that represents all of the current understandings of the parties. The intent of creating an A&R Agreement is to fully repeal and replace the prior agreement, which should be rendered completely null and void. In order to make this 100% clear, you should add an integration clause as the very last section of the A&R Agreement. Here is an example:
Entire Agreement. This Agreement, including all exhibits and appendices hereto, embodies the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement and supersedes all prior agreements, contracts, representations, warranties, promises, covenants, arrangements, communications, and understandings, oral or written, express or implied, between or among the parties with respect to the subject matter hereof, including, without limitation, the Original Agreement, which Original Agreement shall be deemed null and void, and of no further force or effect whatsoever following the date hereof.
Now that you have a fully-drafted A&R Agreement hot off the press, you can share it with the other parties for their review and approval. Ideally, you will facilitate everyone’s review of the new document by providing them with a redlined mark-up of the document (sometimes referred to as a comparison or a blackline) that clearly reflects all of the differences between the original agreement and the A&R Agreement. This will be appreciated by all parties involved, since it eliminates much of the guesswork as to how the contract has evolved over time.