Contract Tip: What is a Counterpart Clause?
Boilerplate contract terms are often overlooked, and in some cases, this can be dangerous. A counterpart clause is one such oft overlooked contract term. While I would hesitate to classify it as “dangerous,” understanding what the clause means and does is helpful in understanding your duties and obligations under the contract.
The Counterpart Clause
To sign a contract in counterparts means that each party to the contract will be signing different, but identical, copies of the contract. The purpose of a counterpart clause of a contract is to expressly allow for the parties to the contract to sign in counterparts — that is, to sign different copies of the contract. By including a counterpart clause, a contract with only one signature would be enforceable to the same degree as a contract with every parties’ signature. It would not be necessary that the parties sign the same or original copy because the inclusion of a counterpart clause shows that the parties intended to be bound by the contract, even though they signed separate copies. All of the different copies, together, will complete a single agreement and any of these copies can be treated as an original for evidentiary purposes.
In many jurisdictions, courts will often find signatures made on differing copies valid even if there is not a counterpart clause in the contract. Despite this fact, it is advisable to include this short and easy clause when drafting the contract.
Why Have a Counterpart Clause?
The primary reason to include a counterpart clause is in the interest of avoiding litigation over an issue that can easily be handled by the addition of a simple clause while drafting the contract. The addition of a counterpart clause will prevent any party from trying to assert that the contract is invalid because there isn’t a single copy with all of the parties’ signatures. Including a counterpart clause, while not necessary, does reduce risk.
Counterpart clauses are especially useful for contracts with many parties that are unable to be physically present to sign. Often, it will not be possible to get all parties in the same room at the same time to sign a contract. A counterpart clause overcomes that obstacle. Conversely, a counterpart clause will be irrelevant if all parties are able to meet to sign a single copy of the contract.
Typically, a counterpart clause is generally considered a “neutral” clause that doesn’t significantly benefit either party. However, if one party is more likely to need to enforce the agreement as against the other party, a counterpart clause can remove one potential defense or argument of the other party that the contract is void or unenforceable.
Model Counterparts Clause
A typical counterpart clause will look something like this:
“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.”
Counterpart Clause and the 21st Century
When drafting a counterpart clause, or reviewing a contract and checking for a counterpart clause, you may want make sure the language allows for the use of an electronically-scanned signed copy. While a PDF is great, you may also, at some point, want to receive the signed hard copy. When drafting your counterpart clause, you might consider adding the requirement that the originals be mailed immediately after signing.