Corporate & Securities Law

When a Written Contract Is Preceded by Oral Agreement

By Ken Adams

It’s commonplace for performance to begin before a contract has been signed, with the contract being signed once all necessary approvals have been secured. MSCD 1.32 recommends that in such contexts, you put in the introductory clause the date the contract is signed, rather than the date performance began. (That assumes you’re using a date in the introductory clause rather than dating the signatures; see MSCD 1.16.)

But if the parties reached agreement orally in advance of a contract, wouldn’t it be more accurate to use in the introductory clause the date of the oral agreement? That question was posed by a participant at my recent Toronto seminar.

Courts have certainly been willing to hold that a contract exists before a written contract has been finalized. See, for example, this June 2007 blog post. But I’d still use as the date for a written contract the date it was signed. It’s likely that the written contract addresses many more issues than were covered by the oral agreement, making the written contract different from the oral agreement.

Furthermore, giving the written contract its own date simply reflects the reality of how the contract process unfolded, and it’s always good to have contracts track reality. If the date of the oral agreement was reached is somehow significant, then mention it in the recitals of the written contract.

Full post as published by AdamsDrafting on May 07, 2009 (boomark / email).