Backdating contracts can be a crime

A BBC report on the Dominique Strauss-Kahn story today states:

Mr Strauss-Kahn’s apparent decision to fight the case echoes an earlier episode where he chose to tackle a legal problem head-on.  In 1999, he resigned as France’s minister of economy and finance, to focus on his defence against an accusation that he backdated documents to justify his consultancy fees for work on a student health insurance fund.  He was acquitted in 2001.

Further information on this story appears in a Los Angeles Times news report here.

IP Draughts is unfamiliar with the French law on backdating documents, but can provide some insight into English law in this area.  Section 1 of the Forgery and Counterfeiting Act 1981 provides:

A person is guilty of forgery if he makes a false instrument, with the intention that he or another shall use it to induce somebody to accept it as genuine, and by reason of so accepting it to do or not to do some act to his own or any other person’s prejudice.

Under Section 8(1)(a), “instrument” is defined as including:

any document, whether of a formal or informal character

Under section 9(1)(g), an instrument is false:

if it purports to have been made or altered on a date on which, or at a place at which, or otherwise in circumstances in which, it was not in fact made or altered

Accordingly, mis-dating a contract could amount to an offence under this Act.  Such an offence could be tried in the magistrates’ court or on indictment.  Section 6(2) provides that the maximum penalty on indictment is 10 years’ imprisonment.

Contracts drafted by English lawyers typically include a date in the first line.  This is usually introduced by wording such as:

This Agreement is made this ___ day of _________ 2011

Best practice among English solicitors is not to type this date in the agreement prior to signature, but rather to write the date in by hand once all parties have signed.  More often than not, in our experience, when parties type the date in ahead of signature, one or both parties fails to sign on the typed date.

Although it is probably rare that a criminal forgery is committed in these circumstance (it is not a strict liability offence, so criminal intent must be present), it is not something that most of us want to risk.

There is usually no problem with making the contract effective from an earlier date.  The best way of doing this is to have a defined term such as Commencement Date or Effective Date, and to state in the body of the contract that the contract takes effect from that date.

Contracts based on a US template sometimes state in the first line that they are dated “as of” a particular date.  This probably means “with effect from” rather than “on”, and so probably don’t fall into the trap described above.  However, if parties intend to rely on this when stating a date different to the signature date, and particularly if the agreement is made under English law, we would recommend using wording that is more explicit than “as of”, such as “takes effect from”.


Filed under Contract drafting

5 responses to “Backdating contracts can be a crime

  1. 1/ Obviously no one should misdate instruments.

    2/ ‘Retroactivity’ can matter for all the reasons anyone is tempted to backdate an instrument. A business entity’s financial statements may need to reflect sales contracts closed in a period. A salesperson’s quota may be met or unmet based on contracts signed in a period. Taxes payable may depend on capital gains realized in a period.

    3/ That said, there can be honest reasons for ‘retroactivity’, even if it is possible or certain that intervening rights will play a role, so a drafter must decide how to express a contract that may or will have a gap between its effective point and a later point at which signing is complete.

    4/ Stating the contract’s effective point but omitting any information about the point at which signing is complete (undated signatures) conceals the existence of any ‘retroactivity gap’. (I say effective ‘point’ rather than ‘date’, because a date is a 24-hour period and sometimes greater precision is needed, as when several related contracts and deeds are signed on the same day and their sequence matters.)

    5/ It’s actually imprecise or at least misleading to talk about ‘retroactivity’, because one can’t actually change the past, but one can create legal fictions as needed, using ‘deemed’ or another device. What actually happens is that when the ‘retroactive’ contract takes effect, the parties’ duties and rights become (except for intervening matters) the duties and rights the parties would have had if the contract had taken effect at a specified earlier point. So it would be more transparent to say something along the lines of ‘the parties’ rights and duties under this agreement will be as if this agreement took effect at noon on 25 January 2019′, and then specify the date (and, if possibly relevant, the time) of each signature. Then a reader knows the precise extent of any ‘retroactivity gap’.

    6/ It is often useful to have identifying information in the introductory clause, and a reference date often answers that need best. When used, it should be marked as a reference date: ‘This agreement, dated 25 January 2019 [at noon] for reference only, is between’, etc. The drafter using this device must specify the effective point of the contract some other way, or leave it unstated.

    • In principle, I agree with all of these comments. In practice, parties sometimes want to “fudge” for reasons that range from the innocent to the fraudulent, with carelessness about legal formalities usually closer to the former than the latter. The lawyers advising may be held to a higher standard.

  2. Reblogged this on IP Draughts and commented:

    This very old golden oldie came into IP Draughts’ mind today as a result of a news report that a solicitor had been struck off for backdating a document. So there is another reason for not misdating contracts!

  3. Christopher Whent

    I include a date in the introductory clause as a matter of identification, avoiding any statement that it was “made” that date or as of that date. As the last article of the contract, just above the signatures I include:

    This agreement constitutes only an offer until executed by the last party to sign. The parties are nevertheless signing this agreement to take effect from the date stated in the introductory clause.

    I disfavor the dating of signatures, not least because the omission of a date is not uncommon even on an otherwise fully-executed contract. Furthermore, the inclusion of a date in the introductory clause and dates of signature is, at best, confusing. Finally, with a clear statement of when the agreement is to take effect, the dates of signing become largely if not entirely redundant, and I loathe redundant material in my contracts.

    • Neil Trenholm

      I find that a blank date at the top of a contract causes problems. It’s as if the parties are afraid to insert a date and prefer to leave it to the other with the result that no one inserts the date. In a recent 3-party contract, the signed copies were distributed with no date inserted at the top causing us to go back and get agreement on the date. My current practice is to use dates at the signature line with a clause that it takes effect when the last party signs. If it is to take effect as of a certain date, I add a furtehr clasue to say that.

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