Executed Contract: Key Facts and Legal Essentials

Key Takeaways

• An executed contract is fully signed and binding, with obligations fulfilled or actively enforceable.
• The execution date and effective date may differ and have legal implications.
• An executed contract differs from an executory contract, which still has outstanding obligations.
• Proper execution requires valid signatures, capacity, and compliance with formalities like witnessing or notarization.
• Electronic signatures are legally valid in most jurisdictions.
• Executed contracts should be retained for the contract term plus the applicable statute of limitations.
• Errors in execution (like missing signatures) can render a contract unenforceable.

An executed agreement is a signed document made between the people needed to become effective.

Executed Agreement

The document or contract can be made by two or more people, a person and an entity, or two or more entities. Contracts usually define the obligations of one party in terms of goods or services to another party and are not effective until everyone has signed the agreement. Some contracts require the signatures to be witnessed.

Consider the two definitions of executed agreement: 

• To complete and validate a legal document, law, decree, or judicial sentence
• Fulfilling the requirements of a legal document or other agreement by signing or sealing

The origin of an executed agreement dates back to the 1300-1400 Late Middle English period. There are various kinds of documents that may be executed to become effective. The most common documents include contracts between two or more parties, including rental, service, and sales contracts.

Executed Contract vs. Executory Contract

An executed contract is one where all parties have signed and fulfilled their obligations, making it fully binding and enforceable. In contrast, an executory contract is still in progress—some duties remain incomplete. For example, a sale of goods contract is executed once payment and delivery occur, while an ongoing service agreement remains executory until all services are provided.

Executed Date

The executed date is the day when the contract was signed by all the needed parties. It can be the effective date of the contract which can be specified in the contract. For instance, Susan signs a lease on April 4, with a date to move in on May 1. The execution date is April 4, and the effective date is May 1.

Example of executed agreement:

• Fred wants a car at a car lot and is thinking of whether to buy it or not. When he decides to buy it, John signs a purchase agreement, pays for the car in cash, and walks out with the keys in his hands.

Example of executory agreement:

• Fred buys the car by signing a lease contract where he agrees to pay a certain total each month until the car is completely paid for or he'll return the car back to the dealership. The contract terms are not fulfilled until the car is paid off or returned.

Execution Date vs. Effective Date

Although similar-sounding, the execution date and effective date serve different purposes.

• Execution date: The date all parties physically sign the contract.
• Effective date: The date when the contract’s obligations become enforceable.

These dates may be the same but can differ—for instance, a lease signed in April but starting in May. Misunderstanding these dates could lead to missed deadlines or disputes over responsibilities.

Basics of Executing a Contract

• You have to read and understand the contract provisions, including the fine print and areas of the agreement that is also in another document.
• If the document binds the person or entity with a high amount of expense or service, it is recommended to work with an attorney before signing anything.
• Make sure to understand contract terms such as execution and effective dates and the difference between them.
• Any future changes to the document have to be made in writing and signed by all the involved parties.
• Each party should keep a copy and refer to it from time to time to fulfill their responsibilities. If one party doesn't fulfill the responsibilities, the other party may file a civil lawsuit.
• For instance, if John fails to pay the rest of the owed amount for the car, the dealership can repossess the car and take him to civil court for the remaining amount owed.
• Let's say you wrote everything down and are ready to execute an agreement. It's important to follow certain rules when executing a contract to avoid potential problems in the future.
• If the contract has gone through several revisions, don't assume the last version is what you think it is. Be 100 percent sure you know what you are signing.
• It's important to date the contract in order to help identify the contract years later and for a chronological context. Under New York law, you can preset the date of the contract by writing "as of" such as date, and make it effective on that date.
• Both parties should sign the contract to be on the safest side because in states like New York, signing a contract is not necessarily needed to have an agreement be valid. If there is an indication of consent by you and the other party, then both are bound, but a signature is best for an agreement to be bound.
• Last minute changes to a contract done by hand should be started by the parties concerned. A revised contract would be best for any revisions done.
• Sign in your correct capacity, which identifies your name and position. If signing for a business, identify the name of the business.
• Check the other party's authority to sign the document.
• Get an original executed copy of the contract for your files, as each party has to have an original of the executed agreement.

Common Pitfalls and Enforcement Issues

Improper execution can jeopardize a contract’s enforceability. Common mistakes include:

• Missing required signatures
• Unauthorized signatories lacking authority
• Failing to witness or notarize when required
• Using an electronic signature when a physical one is mandated
• Neglecting to initial handwritten changes

Each error could open the door to legal challenges or claims that the contract is void.

Key Elements of an Enforceable Executed Contract

For an executed contract to be legally enforceable, it must contain these essential elements:

1. Offer and acceptance
2. Consideration (something of value exchanged)
3. Intention to create legal relations
4. Certainty and clarity of terms
5. Capacity of parties to contract
6. Legality of purpose

Additionally, it must not be affected by issues like fraud, duress, or misrepresentation.

Electronic Signatures and Executed Contracts

In most jurisdictions, electronic signatures are legally valid for executing contracts. The global rise of digital contracts underscores their growing acceptance. However, parties must verify whether specific agreements require physical signatures or notarization under local law.

Retention Periods for Executed Contracts

Executed contracts should be retained beyond the term of the agreement. Best practice is to keep them for the contract duration plus the applicable statute of limitations, which can range from 3 to 10 years depending on jurisdiction. This protects against claims arising after the contract’s conclusion.

Frequently Asked Questions

1. What is the difference between an executed and an executory contract?
   An executed contract is fully signed and completed, while an executory contract still has pending obligations.
2. Is an electronic signature valid for an executed contract?
   Yes, in most jurisdictions, electronic signatures are legally recognized, unless specific laws require physical signatures.
3. What makes an executed contract enforceable?
   It must include offer, acceptance, consideration, intent, clear terms, and be signed by parties with capacity, without fraud or duress.
4. How long should an executed contract be kept?
   Retain the contract for the contract term plus the statute of limitations—typically 3 to 10 years, depending on the jurisdiction.
5. What happens if a contract is executed incorrectly?
   Mistakes like missing signatures, unauthorized signatories, or lack of required notarization may render the contract unenforceable.

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