Corporate & Securities Law

Some Kinds of Backdating May Be Permissible, But that Doesn?t Make It a Good Idea

By Ken Adams

On the website of the state bar of Wisconsin I came across an article entitled “Backdating Documents: Not Necessarily the Stuff of Scandal.” It contains the following passage:

Drafting and executing a document after an event occurs, but in a manner that accurately reflects the date on which the event transpired, is a permissible form of backdating. This is backdating that memorializes, something the United States Court of Appeals for the Seventh Circuit has recognized as a legitimate practice. For example, if parties clearly reach an agreement on Dec. 31, 2009, but do not execute a contract formalizing their agreement until Jan.3, 2010, the contract may be dated as of Dec. 31, 2009. This is simply the accurate memorialization of a past event, something that is essential to legal practice.

But just because something might be permissible doesn’t mean that it’s a good idea. I recommend not backdating a contract. Here’s what I said in this May 2009 blog post:

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.

If having a contract accurately reflect how events transpired doesn’t work for you, you’ve got problems that will only be exacerbated if you try to engage in any sleight of hand over dating.

Full post as published by AdamsDrafting on September 20, 2009 (boomark / email).