Can you count the number of contracts you have seen in which the date is not filled in? Do you ever wonder if it matters? What if there is a date on the contract but the date is intentionally designated as before or after the date the document was actually signed? What if the date is just wrong?

Quite some time ago, judges began giving broad latitude to contracting parties as to the date of their documents. Courts will generally honor contracts that have a date that has already passed when executed or executed "as of" a certain date.

If the date of the contract is wrong, why is it wrong?

If the contract was intentionally backdated to claim tax benefits in the prior tax year, this action could subject the parties to criminal action. If the contract was dated incorrectly to defraud a party to the contract or another party, then it could bring civil liability.

However, most of the time problems in dating documents arise because the parties in equipment financing generally do not all sit around a closing table to sign documents and fund the transaction the same day. The lessor may generate the lease with a date completed and email the form to the lessee in another state. The lessee may then wait several days before signing and returning the document. Alternatively, the lessor leaves the date blank with the expectation that the lessee will date it when it is signed. The document is the returned without a date. In these circumstances, the mere fact that the lease is not dated (or correctly dated) should not make it unenforceable.

If a court needs to determine the date of the contract under these circumstances it should look to the intent of the parties. It could look to the date the signed contract was mailed or emailed. It could look to evidence of when the parties started taking action in reliance on the contract. However, when a creditor files suit on a lease, EFA or any type of financing contract establishing the contract date adds time and cost to what should be a simple enforcement proceeding. It is best to take this issue off the table by getting the date right when the agreement is signed.

Which document?

 The ramifications of a missing date or incorrect date can differ with the document. If the date is left off a lease agreement then if the equipment is successfully delivered and accepted with a Certificate of Acceptance then the date on the lease is probably of little significance. However, if the Certificate of Acceptance is dated prior to the date the equipment is actually accepted (or if the lease commences on execution of the lease document) then the lessee may be harmed if the lease payments begin prior to delivery of the equipment or funding of the lease. If the agreement is an Equipment Finance Agreement the lender may actually be accruing interest before it has advanced the purchase money. Whether by accident or design we fear that this happens too often.

Of course, it is possible that the lessee could post-date a Certificate of Acceptance or fail to return the Certificate of Acceptance in a timely manner thus get some free use of the equipment before the lease term starts. This issue can be handled under lease terms that provide that equipment is deemed accepted once a certain number of days pass after deliver or the customer begins using it.

An error in dating a lease document can cause a breach of a lessor's representations or warranties in an assignment document. If a lessor or lease originator represents to its assignee that equipment has been "delivered, inspected and accepted by the lessee" in a document that is dated as of a date prior to when this actually occurred, the representation is technically incorrect. What about a representation that no liens exist in a contract dated as of a future date? If a lien attaches shortly after the contract is actually executed, is this a breach of representation because, as of the later date, the lien as already attached?

Effective date

As we mentioned above, leases and EFAs are frequently not signed on the date they are prepared. They may even be executed on multiple dates. For example a lease may be signed by the lessee on one date and "accepted" by the lessor a few days later. The lease may state that the agreement is effective on the date when the signed lease is received and accepted by the lessor as evidenced by lessor's signature on the lease. Without such a stipulation a court will probably determine the "date" of the contract is the date that the last necessary signature was made.

Many leases address this issue by stipulating an "effective" date or "as of" date. The lease will state that the effective date of the contract is a given date or will be the date of some future event. This is basically an agreement by the parties as to the date the agreement is effective regardless of the date it is actually signed by the parties. Such a provision should be enforceable.

However, a bad "effective date" can cause the same problems discussed above. If that date is routinely the date the form is prepared for the transaction, make sure that date makes sense under your documents.

The message here is not to change practices (unless you are booking deals and charging rent as of the date documents are prepared rather than the date funding occurs). The message is to be careful and think through the meaning of the dates in your documents, be they purportedly the date of signature or an "as of" date. If the parties desire an effective date different from the date the documents are signed, it is often best to state specifically that there will be a future effective date and how that date will be determined.

Special thanks to Patti Reid of Renasant Bank who suggested this article.