Tuesday, February 28, 2012

Counterpart Clauses

Counterpart clauses are often used when the parties to an agreement are executing separate copies of that agreement. They are primarily used:

  • in large transactions involving multiple parties where not all the parties will be physically present at the signing and therefore there will be no single agreement that contains all the signatures of the signing parties;

  • in transactions involving the sale of property where the parties exchange signature pages (normally through their property lawyer) and keep only the signature page received from the other party; and

  • in any other transaction where circumstances prevent a single copy of an agreement being signed by all parties to it on the signing date.

  • A counterpart clause would typically read something like “This agreement may be executed in any number of counterparts, each of which when executed and delivered shall constitute a duplicate original, but all counterparts together shall constitute a single agreement”.

    The absence of a counterpart clause does not of itself invalidate an agreement that the parties execute by separate counterparts. A counterpart clause may however help to prevent a party from claiming that an agreement is not binding because there is no single copy of it that is signed by all the parties or because they did not know that they were entering into a binding contract by signing an agreement not signed by the other parties to it.

    Counterpart clauses are also useful where the parties to an agreement want to be sure that each copy of it is recognised as an original. Parties often require more than one original copy of an agreement for tax, regulatory or other administrative purposes. Technically, where all the parties execute a number of copies of the same document, the copies are duplicates rather than counterparts and accordingly, some lawyers also refer to duplicates in the counterparts clause.

    A counterparts clause may be omitted where:

  • all the parties are present at a signing where each party will sign as many original copies of the agreement as required, i.e., they will execute in duplicate.

  • original copies of the agreement are to be signed at different times by the parties, for example, all original copies will be sent to each party for signature in succession, with the agreement to be dated and take effect on the date of the last signature; and

  • only one original copy of the agreement is required and certified copies are made and distributed to all parties to the agreement.