It is trite law that once a
written contract is concluded between two or more parties it cannot be varied,
changed or amended unless expressly agreed and/or consented by the parties thereto.
The Law of Contract Act, Chapter 345 of the laws of Tanzania, Revised Edition
2019 (the “Act”) which is the primary piece of legislation governing contracts
in Tanzania, has limited provisions on varying, changing or amending a written
contract or the contents thereof. As a result of this lacuna, one has to look
at different modalities available under common law, judicial precedence on the
subject (if any) and acceptable practice(s) prevalent in Tanzania.
Below is an overview of the different ways and/or modalities in which a written contract or the contents thereof can either be varied, changed or amended:-
NOVATION: this is a doctrine/principal of law that recognizes that one party to a contract can substitute its obligation to a third party thereby releasing that party from a written contract. In a nutshell, the third party will step into the shoes of one of the original parties who is being released from the said contract.
In effect, novation will create a new contract or new contractual relations between the remaining original party(ies) and the incoming new third party as a result extinguishing the contractual obligations of the party being released from a contract.
Novation is one way of circumventing the doctrine of privity of contract. In addition, novation requires consent from all parties and consideration (because a new contract is being created) for it to be valid.
Section 62 of the Act recognizes novation, it provides that, where the parties to a contract agree to substitute a new contract for it, or to rescind or alter it the original contract need not be performed. This indicates that once the original contract is properly/duly novated it need not be performed by the remaining parties, that is, the new contract will come into effect.
ASSIGNMENT: this is the act of transferring ones existing proprietary rights under a contract to another party (often a third party). Arguably, assignment only transfers rights and not duties or obligations under a contract, however, in certain unique instances, assignment can also transfer the duties or obligations of a party to a contract (e.g. if required by law). Unlike novation, assignment does not create a new contract, it is a mere transfer of rights to another party (third party) under a contract.
Assignment in most cases (subject to specific contractual clause on assignment) requires notice from the assignor to the other party to a contract. Assignment is done via a notice of assignment from the assignor to the other party to a contract, notifying him of the potential assignment to the assignee. Certain contracts may, however, require consent prior to assigning one rights thereunder to another party. It is important to note that certain provisions of the law or contractual provisions may prohibit assignment.
VARIATION: this occurs when parties to a contract intend to change certain aspects thereto or clauses in a written contract. For instance, parties to a loan agreement can agree to vary the loan amount by increasing it (up stamping). Similar to novation, a valid variation requires both consent (both parties must agree to the variation) and consideration. However, in most instances’ variation is often done via a ‘Deed of Variation’, and by doing so, there is no need to justify consideration for the variation.
AMENDMENT: a contract is amended for various reasons, inter alia (i) to correct an error; (ii) to add an additional clause or provision to a contract; or (iii) to delete a redundant clause in a contract. Amending a contract can be done in different ways as will be explained below:-
ADDENDUM
An addendum is a document used to add or modify a clause in an existing written contract. An addendum has to be consented to or agreed by both parties to the original existing written contract and both parties have to sign the addendum as they signed the existing written contract.
AMENDMENT DEED
This usually records the changes or amends what the parties to a written contract have agreed to make. An amendment deed does not replace or reproduce the existing contract but rather modifies part of it as agreed by the parties.
AMENDMENT AND RESTATEMENT DEED
Parties to a written contract may often make several amends or modifications to a contract over time. Instead of having multiple amendment deeds/agreements recording all these changes, parties may opt to consolidate all the amendments into a single document, that is, an amendment and restatement deed. As the name itself suggests, an amendment and restatement deed usually amends the underlying contract and at the same time restates it (repeats what has not been amended). This means that the underlying contract is reproduced taking into account the changes made therein.
A properly drafted written contract will usually contain a clause indicating how that contract can be amended, modified, varied or changed. It is therefore of utmost importance to review and understand the clause(s) in a contract that provides for the modality and/or manner in which it can either be amended, modified, varied or changed. It is also of equal importance to consider any underlining legislative provisions and/or restrictions affecting the manner in which general amendment, modification, variation of contracts can be effected.
By Kelvin Mosha - Advocate
Kilindu Giattas & Partners
Note: This is not a legal opinion and the contents hereof are not meant to be relied upon by any recipient unless our written consent is sought and explicitly obtained in writing.
