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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 often 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 counterpart clauses, 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 counterpart clauses in the contract. Despite this fact, it is advisable to include this short and easy clause when drafting the contract.

Why Have Counterpart Clauses?

The primary reason to include counterpart clauses 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 counterpart clauses, 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, counterpart clauses are generally considered “neutral” clauses that don’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 counterpart clauses, 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 counterpart clauses, you might consider adding the requirement that the originals be mailed immediately after signing.

Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later. A Slingshot company.

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2 comments

  • nguyen Phan /

    It seems that this clause has no meaning at all. I send my signed counterpart to other side. But he does not send his one to me or he changed a bit on his signed counterpart , then send. What will happen?
    I usually sign contracts first, then send to other side by post. They receive and sign, and send back to me. Why need get all in the same room at the same time to sign a contract? Is there anyone wanting to do this? Now is 21st centrury sir!

    • What the clause permits, is to have two (or more) identical signature pages with different signatures, so that they are all construed as part of signing the same document.

      I agree it’s very common to do this, but believe it or not, there are some serious downsides to the practice. The biggest one being, if one party doesn’t sign and deliver his or her signed copy to the others, it potentially places the other parties at a disadvantage, because if there’s a dispute, you now have to prove they either did sign even though you don’t have their signature or that they actually intended to be bound to all the terms in the agreement.

      Seems like obvious stuff, but you may be surprised how often this comes up, primarily in two contexts: The first is where two or more parties are negotiating terms, but just don’t quite get to the specifics of an agreement. Then you have one party trying to enforce terms that weren’t quite settled. The second is where a party is intentionally a bad actor, and is happy to receive the benefits of the bargain for however long possible, but then when in a dispute to perform or otherwise honor duties in the bargain, then argues he or she never agreed to the specifics, and it’s a debate about that.

      Such disputes can be VERY COSTLY for our clients, so it’s a fight you want to avoid if at all possible.

      Therefore, unless it’s inconvenient, I would recommend avoiding a counterparts clause — just to keep everyone honest.

      Larry.

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