Often contracts come with references to attachments. This may be labelled as schedules, appendices or addenda, but what are they for and how do they affect the main contract? Here we look at their different use cases and discuss how to monitor and evolve your contracts to maintain successful commercial relationships.
Our commercial solicitors are on-hand if you need advice on the effect of any appendix/schedule, to help you with negotiations and draw up or review any appendix/schedule/addenda you may want to use - don’t hesitate to get in touch via the form at the end.
Contract appendices and schedules
What are appendices and schedules?
You will frequently see references in a contract to 'appendices' or 'schedules'. The terms are often used interchangeably.
Just as you would expect, these are pages that come at the end of the contract. Each appendix or schedule will appear as a separate page and will be headed up (for example) 'Appendix A' or 'Schedule 1'.
There is no limit to the number of appendices that can be used; it turns entirely on the nature of the arrangement between you and your counterparty.
The function of appendices/schedules is to expand on and clarify certain parts of the main contract. They don’t alter the original document and are entered into at the same time as that document is signed.
They tend to cover technical or statistical matters. For example, you could expect to see the agreed formula for the calculation of the pricing of an order in an appendix, as well as operational contact details or a template order and sales form.
As you can imagine, the negotiation of appendices can take as long as the main contract. Often, any such delay is due to the time it takes to collect the relevant data.
But agreeing - for example - the template of the order and sales form to be used which will be used for each sale is crucial to the success of the relationship, so even though this will appear as an appendix, these negotiations needs to be taken very seriously.
Why use an appendix or schedule?
A primary reason for using appendices is to separate out the main contract and its purely legal provisions from the results of the technical and commercial negotiations.
For example, a Master Services Agreement for the provision of cleaning services will typically have all the legal provisions within the body of the main contract and the technical and transaction-specific detail in appendices. Contact details and lists of subsidiaries and national requirements can appear in appendices - they make large contracts more manageable.
Contract addenda and addendum
What is an addendum?
Unlike an appendix, an addendum operates to 'add to', to change or cancel certain portions of a contract after it has been signed.
When to use addendum?
- Something may have come up that didn’t apply when the main contract was negotiated - for example, the effect of Brexit on the need for 'plant passports' and the implications of the additional paperwork for previously-agreed delivery deadlines.
- Both sides agree that their arrangement needs to change.
- An addendum is signed to give effect to those changes.
- It operates as a stand-alone document and needs to be signed by all parties before the change can take effect. An example of an addendum might be a side letter which cross-refers to the main contract, sets out the agreed changes and is signed by all parties.
How to monitor appendices/schedules?
You need to check that appendices are cross-referred to in the main contract and that those references are correct (e.g. 'Appendix A Pricing' actually does set out the pricing formula!).
As with any arrangement, the activity between the parties reveals the effectiveness of the negotiations. In another example, if data set out in an appendix is likely to need updating in due course, the process of doing so needs to be discussed at the time that the original document is being negotiated.
However, if it appears that the process set out in an appendix is not being followed (eg. the use of a different order form to that agreed on) that is a matter for prompt discussion and the execution of an addendum, if necessary.
If conflicts arise between the original contract and the appendices?
They shouldn’t! In an ideal world, every possible variation is anticipated in the contract before it is signed… But if a conflict does arise, and the parties agree, the main contract would need to be amended.
There could be a conflict, for example, between the definition of 'business day' in the industry-standard Master Services Agreement which was originally signed and the reality of the arrangement between the parties, which emerges only after some months.
A properly-executed addendum will be used to give both legitimacy to what actually happens and to bind that process into the Master Services Agreement.