What is an Executed Agreement?
The executed agreement is the version of the agreement that parties sign, date, and/or notarize. The executed agreement is used by judges to decide almost every type of legal dispute, and the executed agreement is almost always Exhibit A to a motion or course of action. The executed agreement is the written form of the parties’ words and actions. A contract is not legally binding until a party signs it, as that act converts still-present promises into present facts.
Whether it’s a car title, lease, loan, mortgage, business deal, or anything else , an executed agreement means that the parties have finished negotiating the terms and conditions and signed on the dotted line. In laymen’s terms, "execution" just means the formal signing of an agreement.
There are some variations in the terms people use when referring to executed agreements. For example, some lawyers specifically use "fully executed" to mean that all parties to the agreement have signed it. Others refer to the parties’ signatures as "executions". Executed agreements are part of all types of court cases, including civil and criminal actions, bankruptcies and divorces.
Distinction Between Executed and Executory Agreement
Executed and executory agreements differ in how the parties between them understand the terms of their agreement. An executed agreement is an agreement that all parties have signed. It is a complete agreement that all parties involved have agreed on, understanding all the terms and conditions, and are held by the terms of the agreement.
An executory agreement is the opposite. It is an agreement that was "half complete," meaning that not all of the previously mentioned important details were laid out in the contract for the parties to understand. An executed agreement undergoes many steps before it reaches the "executed" stage: Terms are negotiated, reviewed and accepted before they’re committed to writing. Once drafted, the agreement is thoroughly reviewed for accuracy. Then, the parties sign and date the contract. If everything is correct, the agreement is executed.
With an executory contract, not enough information was included. There’s more work to be done by the parties before the contract is fully executed. If the information had been added to the agreement initially, the document could move directly from the negotiation stage to the executed stage without the executory period in between. For example, if the total compensation for services to be rendered or the payment terms had been included in the agreement, the contract could have moved straight to executed without the executory process of adding basic terms to the agreement. Contracts can be executed after the following events occur:
- The other party accepts and agrees to the terms of the agreement
- The parties review the final agreement
- Each party signs and dates the agreement
- If necessary, delivery of the executed contract occurs
Value of Executed Agreements in Legal Proceedings
Executed Agreements play an essential role in a variety of legal frameworks, from real estate and business transactions to settlement agreements and legal releases in litigation. The fundamental requirement of contract law – that the agreement be in writing and signed by all parties in order to be enforceable by a court – is most often evidenced by an executed agreement. In some circumstances, however, an executed agreement is not materially different from an unsigned agreement, and, in those circumstances, the precise contents of the executed agreement can be of no small consequence.
An executed agreement can also take the form of a signature stamp, which some courts have held to be binding. When signatures are stamped or when the partnership or corporation name is printed in wet ink, courts have sometimes found that under the unique circumstances of the case, a party has conveyed assent with more formality than a mere oral agreement. Nonetheless, it remains unclear whether or not signature stamps hold the same binding force in every jurisdiction.
Executing an Agreement the Right Way
How to Properly Execute an Agreement
Once you have settled on the terms of your deal and have incorporated those terms into the legal document, the next step is execution of the document. Most of us are "do it yourself" when it comes to getting the proper signatures to execute a contract, so a few helpful hints are in order.
First, the parties to most contracts are required to be "adults" i.e., 21 years of age or older. So, if you are contracting with someone who is not an adult, you have a problem: fraud in the inducement of your agreement. No, that never happens in real life—you think? Some contracts, Construction Contracts, for example, can be signed by entities that are not considered "adults." Because of this, it is always appropriate to verify that the person signing the contract on behalf of any public entity will be signing for an entity that is also a party to the contract, and to note that fact on the signature page of the contract.
Once you have the proper party signing on behalf of the entity, you should require that party to print his/her name next to the signature, to indicate who they actually are.
Depending on the type of contract you are executing, you may also need to put a stamp from the Notary Public on the document affirming the signature. That’s a good general rule even if it’s not expressly required by the document you are executing. Additionally, if the contract you are signing requires two witnesses, you should make sure that there are actually two witnesses who are of "adult" age and not a party to the contract – again, this is always good practice.
Some contracts contain per-page or per-signature requirements that have to be met before the document is considered "fully executed." Make sure you have met those requirements. This is particularly important with multi-page contracts. These requirements can be found in the execution section of the contract, usually at the very end where your signature is supposed to go. Look there and make sure you have complied with any requirements regarding the way the document is supposed to be signed or initialed.
Next, after you’ve got all parties signed up, the contract has to be delivered to be effective. The contract may contain specific requirements for delivery that you need to make sure are met. So, always check for these requirements, as well as requirements for return of an executed copy of the contract.
Types of Executed Agreements
There are many different types of executed agreements that businesses typically use. This includes leases, purchase contracts, service agreements, employment contracts, joint venture agreements, partnership agreements, and bylaws of corporate entities.
Leases are legally binding contracts between a property owner and a lessee. Leases can govern commercial tenants and the tenant could be a natural or juristic person. In an executed lease, both the landlord and tenant are bound by the terms such as the payment of rent, security deposits, maintenance responsibilities, and the term of occupancy.
A purchase agreement is a contract that governs the sale of goods from one person to another. Executed agreements can be part of a larger sales transaction involving buyers and sellers of physical goods, business owners, licensees, franchisors, and franchisees.
In the context of executed agreements, a service agreement is a contract to provide services between a service provider and a client. These can include services vendors, software and systems, telecommunications, transportation, catering, hotel packages, research, brokers, consultants, energy and utilities, franchise developers, and marketing consultants .
Employment contracts in the executed agreement context involve a business entity and an employee. The employer and employee are bound to the terms of the employment agreement including the job description, salary, employment duration, confidentiality, and non-competition provisions.
Executed agreements can also be joint venture agreements. This involves two or more business entities that agree to work together on a project or series of projects. In the executed joint venture agreement, the parties are bound to the terms which may include the sharing of profits, tax obligations, governance, termination, transfers of interests, and actions requiring consent of the other.
Different types of executed agreements can also include partnership agreements. This is an executed agreement between two or more organizations to form a partnership. Such agreements may involve specifically defined roles and revenues as well as other provisions governing the partnership.
The bylaws of corporate entities are also typically executed agreements. Various individuals and/or entities that own shares of a company may well have executed share registry documents as well as shareholder agreements that govern certain terms of their participation in the corporation.
Legal Implications of a Signed Agreement
When an agreement is executed by the parties, they are bound to the terms of that document. It must be construed in light of the rights that flow from the agreement. Parties cannot, unless otherwise agreed, exercise one right at the expense of another. The consideration that flows between parties under the executed agreement can have different values, and may also be different things, but it must still flow from one party to another (and cannot be extracted at the cost of either party). It is this essential element of regrouping a consideration specified in an executed agreement that enforces the contract.
Recognition is given to the fact that executory agreements have a right of cancellation or rescission that would ordinarily apply, or an action for breach of contract would otherwise lie for the conduct of the parties before an executed agreement. Enforceability under the executed agreement is a matter of constitutional law, and a requirement that the law be administered with regard to all the circumstances of the case. The common law doctrine of the validity of executed transactions presupposes that there cannot be a recourse or remedy that serves to reverse the effects of an executed agreement, and a request for such a remedy ought to be distinguished from an action for breach of contract. Once the agreement is executed, the obligations set out in the agreement rest with parties, and involve a strict set of rights and obligations.
An executed agreement is therefore a contract that is fully completed, in that the parties have exchanged the obligations about which they had previously contemplated the need to exchange an agreement.
Guidelines for Reviewing an Executed Agreement
Check for Named Parties: Make sure the named parties are correct and that none have been omitted.
Check Executed Date: The date of execution should also be checked against the original and initial drafts to ensure it has not changed unexpectedly.
Incorporation by Reference: Make sure the agreement is not incorporating any document not agreed upon, which can sometimes happen. Incorporation by reference without the other parties’ knowledge was recently the subject of a litigation dispute.
Signature Verification: Check the signatures of all parties to make sure that they have actually executed the agreement. (Note that e-signatures may not be acceptable in some contexts).
Agency Authority: If the signing parties are not the same persons as the named parties , verify that these parties have authority to execute the agreement on behalf of the parties they are signing for (e.g., review corporate authorizations and ensure they are valid). Also, verify that the signers have signed the agreement on behalf of anyone else they purport to sign on behalf of (e.g., if a spouse signs a spouse/partner agreement, ensure that the spouse signed on behalf of themselves and not their spouse, unless otherwise contracted for).
Truth in Contracting: If a term in the original or initial draft of the agreement struck you strongly as a problem, bring this up and think about why no one mentioned it during negotiations, both in reviewing the executed version and looking back at prior revisions of the agreement.
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