Q&A #105 – Can an exception to a contractual requirement be approved without signing an amendment?

Question: My nonprofit made a grant to another organization, and the grant agreement requires specific benchmarks to be met by certain dates. We recently learned the grantee organization will not be able to meet the first set of benchmarks by the deadline. We are happy to make an exception to allow the organization more time, but we are wondering if it is necessary to sign an amended agreement. 

Answer: Approving an exception to a contractual requirement, such as a specified deadline, essentially means that your organization is choosing not to enforce (or “waiving”) the particular requirement. It is generally not necessary to have both parties sign an amendment to the agreement every time a requirement is waived, but it may be advisable to do so if the exception is something that could repeat or impact other obligations. 

In your case, a well-documented written communication from an authorized official of your organization clearly describing this one-time extension would probably suffice, but you should consider amending the agreement if the change affects the schedule for all the benchmarks that will follow. 

Of course, it is important to read the contract language carefully before approving any exceptions. There are generally two provisions in a contract that are relevant to this type of situation: a waiver clause and an amendments clause. 

A waiver clause will often look similar to the following:

“Either Party's waiver of, or failure to exercise, any right provided for in this Agreement shall not be deemed a waiver of any further or future right under this agreement.” 

This language helps to ensure that approving a one-time exception does not result in your organization waiving other rights under the agreement. If your contract doesn’t have language like this, then it is most likely safer to have both parties execute an amendment describing the change in precise terms.

An amendments clause will typically state that the agreement “may be modified or amended only by a written instrument executed by both parties.” A one-time waiver of one discrete obligation like a deadline is usually not considered an amendment or modification, however these provisions are sometimes written to apply to both amendments and waivers. In either case, this language is mainly of concern to the party requesting an exception, as this party will want to be sure that there is sufficient document to establish it is not breaching the contract.

Planning Tip – A common source of confusion involves the question of who within an organization has the authority to approve an exception or other modification. To avoid controversy over changes made without the proper authorization, consider including contract language specifying the name or title of the person who is authorized to sign amendments, renew the agreement, or waive terms, or give other approvals on behalf of each of the parties (for example, the Executive Director).

If you approve the exception without executing a signed amendment, it is important to clearly state in writing the parameters of the exception to ensure that it is not interpreted more broadly than you intended. For example, in your case you would want to specify the length of the extension and that this extension does not apply to any other deadlines or terms in the agreement.