This article will try to unpick the various legal threads of when you can and cannot backdate documents, and what the consequences will be if you do.
The first and most important thing to note about the consequences of backdating a document is that it is potentially a criminal offence.
My father (who was also a lawyer) used to love telling a story about how he was able to triumphantly prove to the court that a yacht charter was backdated by showing the stamps which had been used to pay the nominal 15¢ stamp duty were in fact first issued by the post office some four months after the date stated on the face of the document.
However, he rarely adds that he actually ended up losing that trial, which brings us to my second point – even though the law generally deprecates the backdating of documents, the legal consequences of backdating are highly variable.
Contracts can also, confusingly, contain defined dates such as ‘commencement date’, ‘effective date’ or ‘start date’.
These dates indicate when the contract or parts of it are due to have legal effect, if these dates are different to the contract and/or signature dates.
Likewise, if you haven’t made the loan yet, you may set the effective date to a future date, so that the interest only starts accruing when the actual loan has been made.
To be clear, having a later effective date does not mean that the contract will not be binding until that later date.
The ‘signature date’ is, unsurprisingly, the date written next to or below the signature of each party, showing the date they signed the contract.
For example, the following is from an employment agreement dated January 2004 and refers, presumably, to the date the employee will actually start work: The term of this Agreement shall commence on the first day of the Company’s fiscal year commencing in the year 2004 (the “Effective Date”) and shall terminate on the last day of the Company’s fiscal year ending in the year 2007, subject to prior termination as set forth in Section 7 below (the “Term”).
But it’s misleading to tie effectiveness of the agreement to the date the employee starts work, as the agreement is effective once the parties have signed it.
If a contract does not specify its effective date, it goes into effect on the date it was signed by the person to whom the contract was offered for a signature.
Sometimes you will want the effective date to be different from the date of signing, either earlier (i.e., backdating) or later (i.e., predating).