Tuesday, 14 July 2015

Contracts and Dates

Ancient Sumerian Contract
Photo credit: Wikimedia Commons

One of the interesting questions I am sometimes asked is whether it is OK to "backdate" a contract. The answer depends on what we mean by "backdate".

If by "backdating" we mean pretending we made the contract at a past point in time rather than now, then the answer is usually "No". The document would tell a lie about itself and that usually falls within the definition of fraud.

If, however, we mean signing the document with today's date, but operating from a past date, then the answer is usually "Yes". Here's an example: a company hires a new employee, but the boss and employee don't sign the worker's hire agreement until Friday. There is usually no problem signing the contract on Friday but making it operate from Monday, i.e. a date in the past.

I say "usually" because the basic ground rules of contract law can always be modified by specific legislation brought in to control a particular area of activity. Generally speaking, however, people can always agree for a certain set of rules to govern their legal relationship for a specified period of time, including a period that has already commenced.

There is another rule that is relevant here. It is not acceptable to make a contract that covers an exchange of value (called "consideration") that is completely finished.  The rule is usually expressed in the phrase: "Past consideration is no consideration". To return to the example, if the person worked for a week then quit, the employer could not then ask the person to come back to sign an agreement once the employment relationship is completely finished, because the obligations on each side are complete.  If there is a left-over obligation, however, then parties can sign an agreement about that thing.  It is also possible to sign agreements acknowledging certain facts to be the case, or that certain actions have been completed.

[This blog post is not intended as legal advice, but as a general educations/informational discussion of topics of public interest. Please visit our website for more information.]

1 comment:

  1. James,

    Without giving away any trade secrets --

    Once a client accepts my Estimate the Estimate and my Terms & Conditions form a contract? If my client has been working with me for years, and I change my T&C, do I need to give them any special notice when I issue the next that the older T&C has changed?

    For example, if I shorten the days to payment from Net 30 to Net 14 and the change is listed in the Terms for Payment - do I also need to alert the client to the whole terms?

    Hah! Do I need to keep track of what I update in my T&C from year to year?