1) Without knowing what the contract says I can't be sure of the answer, but it is highly likely that this is illegal. I'm not sure of the penalties but it is quite possible that an offence would be commited (fraud?). Any criminal offence would ruin chances of later job opportunutues, and the landlord could easily evict all of you. So, whats the point?
2) A new contract is highly likely.
3) Strictly speaking you may not need to put this in writing, but it is best to do so for evidential reasons - it is a lot easier to dispute this later if it is written down in the contract.