Understanding Contract Terms (Post 11): Counterparts
We continue the Understanding Contract Terms series by explaining counterparts clauses. Most contracts include some form of counterparts clause. Counterparts clauses are important to understand when you need to determine how a contract can be executed and when it is enforceable.
What is a “Counterpart”?
Counterparts, in contract law, are one of several written papers that constitute a contract, such as a written offer and a written acceptance, both of which are separate documents, or counterparts, that together form a contract. In the internet age, it is common for two parties to execute a contract without sitting down in the same room to sign the same piece of paper. Often a contract is executed in several counterparts, each signed by a different party and exchanged via email.
You may see a counterparts clause that reads something like this:
Counterparts. This Agreement may be executed in any number of counterparts, each of which is enforceable against the parties actually executing such parts, and all of which together constitute one instrument.
Why Do Counterparts Clauses Matter?
Counterparts combined may constitute an executed contract, even though the “original” retained by one party has only their signature, and is missing the other party’s signature. Having a fully executed contract, even if fully executed in counterparts, provides the parties with the same legal remedies as a contract with all parties’ signatures on the same document. A counterparts clause provides contracting parties with confidence regarding the terms of their agreement, even where there is no “original” containing both parties’ signatures.
Why Use Counterparts Clauses?
Using counterparts may speed up the signing of a contract and reduce the cost of contracting. A counterparts clause inserted into a contract can make it much easier to formally execute a contract for parties that are geographically separated. It can also save considerable time and money. Since the legal effect is the same, counterparts make contracting cheaper and easier. With a counterparts clause, you can take advantage of the lower cost and relative ease while ensuring both parties understand what constitutes an enforceable agreement.
*Thanks to Jesse Livingston for his drafting and help editing this post. Jesse is originally from Los Angeles and grew up helping his father with his construction business. He currently attends law school at the University of San Diego and concentrates on Business and Corporate Law. Jesse helps produce content for the iVLG blog to gain experience on legal issues affecting business and to add to his experience working in-house at a publicly traded company, with a solo practitioner, and at a low income tax clinic. He will be graduating in May of this year and plans to sit for the California Bar.