Multiple Choice Question: Which of the following answers best describes a proper handling of an addendum and an amendment to a purchase agreement? Pick the best answer:

A. The addendum or amendment must be identified in the purchase agreement itself for the addendum or amendment to be properly incorporated by reference.
B. The addendum or amendment must be signed by the parties to the purchase agreement.
C. The purchase agreement must be identified in the addendum or amendment.
D. All of the above. 

Answer: Answer A is wrong. An addendum is generally understood to be an attachment to the main contract, whereas an amendment is a revision to a contract. The distinction centers around timing. An addendum is generally created at the same time as the underlying contract, whereas an amendment is generally created some time after the underlying contract already exists.

As for Answer A, an addendum to a purchase agreement should be incorporated by reference in the purchase agreement itself. However, if an amendment to a purchase agreement does not even exist yet at the time the purchase agreement is created, the amendment cannot be incorporated by reference in the purchase agreement itself.

Answer B could be wrong. A purchase agreement could be C.A.R.’s standard-form Residential Purchase Agreement (RPA), but it could also be an AIR agreement, a new builder’s form, an agreement drafted by an attorney, or something else. If that purchase agreement references a separate addendum, and the parties to the agreement all sign the purchase agreement itself, they may also be bound to the terms of the separate unsigned addendum. However, that said, the RPA does specifically require any addendum to be signed by all parties (see paragraph 30B). But other non-RPA purchase agreements may not say that. Hence, the proposition that “an addendum to a purchase agreement, regardless of the form used, must nevertheless be signed,” is not necessarily a true statement.

In contrast to an addendum, an amendment to a preexisting purchase agreement must generally be signed, regardless of whether the underlying agreement is the RPA (see paragraph 29), or another type of purchase agreement (because of the requirements of a law called the Statute of Frauds).

Answer C is the correct answer, and so, Answer D is wrong. As for Answer C, either an addendum or amendment should properly identify the underlying agreement to which it pertains. This is an important point. An addendum to the purchase agreement is very different from, for example, an addendum to a Request for Repair, given that, among other things, the purchase agreement may already be agreed upon, whereas the Request for Repair may not have been agreed upon yet. Agents should take the time to correctly complete the first few lines of standard-form addendums and amendments to make sure that they refer back to the proper underlying document.

Copyright© 2021 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of January 11, 2021. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.