From time to time we get questions concerning the effective date of leases or purchase agreements. Our recommended course of action is to expressly state the effective date in the agreement because it helps avoid any confusion or doubt as to that issue in the future. However, in the absence of providing an express effective date, the effective date automatically defaults to the date that the agreement is signed by both parties and “dispatched.” So, in addition to stating the effective date in the agreement, dating each signature becomes important, as well as documenting how and when the last signature is delivered or dispatched. Again, in the absence of an express effective date, the effective date would be the date that the agreement or lease is fully executed and dispatched to the other party.
By way of illustration, if a contract is signed by both parties on Friday the 1st but the final “delivery” or “dispatch” (via mail or email) does not occur until Monday the 4th, then the effective date would be the 4th, not the 1st. The date received is not relevant.
There are also some misconceptions about how to handle a contingency or condition where the end date falls on a weekend or holiday. Again, sometimes the expiration date for meeting contingencies and conditions of contracts is specifically identified. However, many times the expiration date is based on the effective date, e.g. 60 days after full execution. In these cases, the expiration is the exact date even if it falls on a weekend. So, if a contingency expires on a Sunday and you wait until Monday to notify the other party, it is too late. It would be better to do it on Friday in that case or to add a provision to the agreement which indicates that if a date of importance falls on a holiday or weekend, then such date of importance shall automatically be deemed to fall on the succeeding business day.
If you have any questions on effective dates or any other term of your lease or purchase agreement, please feel free to contact a member of our team.
This article appeared in our company newsletter in September of 2020. Please click here to download the entire newsletter.