Backdating Contracts: Everything You Need to Know
For example, if an agreement was entered into today but stated that its terms would be enforceable from July , would Date published. If a contract does not specify its effective date, it goes into effect on the from the date of signing, either earlier (i.e., backdating) or later (i.e. backdating. It's not unusual for parties to a contract to want the written agreement to cover a period before it's actually signed. There are any.KRIS LUHAN’S SM CONTRACT AGREEMENT?
With this in mind, misdating or backdating a contract could be considered a serious legal offense. An offense of this nature is subject to trial in a magistrate's court or even indictment.
According to Section 6 2the maximum allowed penalty in the event of an indictment is 10 years in prison. Pitfalls and Practices of Backdating a Contract's Effective Date Decisions regarding the date that should be put on a document are likely to be something that has to be done on a regular basis in a practical business setting.
This is true because of the fact that most business and legal documents take some time to come together, requiring drafts and negotiation before finally being executed. It is common for there to be days or weeks between agreeing to commercial terms and the official contract execution date.
Backdating contracts and other documents and instruments | Harneys
Even in the case of something as simple as a Confidentiality Agreement, the involved parties may have legitimate intentions for the document to be effective before it was actually created. One common approach is to date the document only once all involved parties have signed it and to use a date that goes back no further than the date of the most recent signature.
This will normally cover most cases that come across a corporate attorney's desk. Many jurisdictions allow for contracts that have an effective date that is earlier than the date that the documents were signed.
This is commonly known as "backdating.
Backdating contracts and other documents and instruments
Backdating a contract can have some negative effects. Potential drawbacks can include: The first and most important thing to note about the consequences of backdating a document is that it is potentially a criminal offence. However, at common law this was a criminal offence going by the contradictory sounding name of uttering a false document and in most English law based legal systems it is still an offence today, although in many cases statutory provisions have superseded the common law for example, in the British Virgin Islands see section of the Criminal Code Where backdating is done for financial gain, it may also constitute the more dull-sounding criminal offence of obtaining a pecuniary advantage by deception.
Although criminal prosecution might be a risk in serious fraud cases, in most day to day legal matters where backdating occurs for reasons of administrative convenience, or simply by oversight or error, the risk of being charged with a crime are commensurately small.
Can you backdate an agreement? | Practical Law
But even if a person is not charged with a crime, the fact that a crime can be demonstrated to have occurred may still impact the rights of the parties. In certain cases a criminal act may negate insurance.
Lack of a prosecution does not mean a lack of legal consequences. However, such doctrines are normally limited to situations where one party backdates the contract without the knowledge or consent of the other.
When Does a Contract Take Effect?
Where both parties consent to the backdating of the document, normally the courts in common law countries will simply disregard the backdating of the document, and treat the rights as accruing from the date when the document was actually executed. Although in exceptional cases — where third party rights are not affected — the courts might be persuaded to treat the stated date as being the effective date, a situation we return to below.
So is it ever OK to backdate a document?
There are rare occasions when it may be permissible or even justified to do so. A commonly used example is where the parties had originally signed a document, but the original had been lost or destroyed before it could be stamped or filed. In such cases it would be perfectly proper for the parties to re-execute an identical document to replace the missing one.