Sunday, June 13, 2010

What Date Controls the Effective Date of a Contract?

What is the date that controls when a contract becomes effective, and why does it matter?  

There are two basic methods that I've seen used on public contracts for establishing the effective date of contracts.
  1. Specific Date Stated in Contract:  Some contracts will have language at the beginning of the contract that states something like this:  "This Contract is made and entered into on _____________, by and between the Owner and Contractor."  But what happens if the contract is actually signed by both parties either before or after the stated date?  Did the contract become effective at an earlier date when both parties signed it, since that is when they documented their agreement?  Does the contract not become effective until both parties sign it after the stated date, even though the contract stated an earlier effective date?  Generally, a contract does not become a binding agreement between the two parties until both parties have actually signed it.  Thus, using a specific date in the contract as the effective date that not connected to signature dates may be problematic.

  2. Date of Last Signature:  Under this option, the contract will include language similar to the following:  "This Contract shall be effective on the last signature date set forth below."  On the signature page of the contract, there is a place next to each signature for the party to write the date when they signed the contract.  This option appears to avoid some of the ambiguity involved in the first option.  The contract becomes effective when the last party signs the contract, indicating agreement between both parties.
Get Legal Advice:  Take a look at your contracts, and check with your attorney or obtain legal counsel to see if you should modify your standard contracts relating to when your contracts become effective.

1 comment:

Scott Wolfe Jr said...

Hi Mike - good post. This highlights the importance of legal counsel for things that sometimes seem a bit inconsequential.