Execution and delivery: Overview, definition, and example
What is execution and delivery?
Execution and delivery are two critical components of the formation and validity of a contract or legal agreement.
- Execution refers to the act of signing or formally adopting an agreement by the parties involved. This is the process where all necessary signatures are obtained, and the document is finalized in terms of consent and agreement by all parties. In some cases, execution may also involve a formal acknowledgment or approval, such as witnessing the signatures or providing a notary.
- Delivery, on the other hand, refers to the physical or electronic transfer of the signed document to the relevant parties or to the person/entity who is meant to receive it. Delivery signifies that the document is no longer just signed, but it is now in effect, and the parties have agreed to the terms as outlined in the contract.
Both execution and delivery are necessary steps to ensure that an agreement is legally binding and enforceable.
Why are execution and delivery important?
Execution and delivery are important because they establish the validity and enforceability of a contract. Without proper execution (signing) and delivery (transfer to the relevant parties), a contract may not be considered legally effective, and the terms may not be binding. These actions ensure that both parties have agreed to the terms and are obligated to fulfill the contract's conditions.
Proper execution and delivery help prevent future disputes regarding the authenticity of the agreement and clarify when the contract comes into force. For businesses, ensuring that both execution and delivery are properly completed is crucial for avoiding legal challenges and ensuring smooth transactions.
Understanding execution and delivery through an example
Imagine two companies, Company A and Company B, are entering into a service agreement. Execution occurs when both parties sign the contract, indicating their mutual consent to the terms. Once the signatures are in place, delivery takes place when Company A sends a copy of the signed contract to Company B, either physically or electronically. At this point, the contract is considered legally binding, and both parties are obligated to fulfill their responsibilities.
In another example, a real estate transaction requires execution and delivery of the sales agreement. The buyer and seller sign the agreement (execution), and once the signed document is transferred to the buyer’s legal representative or escrow agent (delivery), the sale is considered finalized.
An example of execution and delivery clause
Here’s how an execution and delivery clause might appear in a contract:
“This Agreement shall be deemed executed when signed by both Parties and shall be deemed delivered when the signed copy is sent to the designated recipient by email or physical delivery. This Agreement will become effective upon delivery to the Buyer.”
Conclusion
Execution and delivery are essential steps in the process of creating a legally binding agreement. Execution confirms that the parties have agreed to the contract, while delivery ensures that the contract is officially transferred and enforceable. Both steps are necessary to establish that the agreement is valid and that all parties are legally bound to uphold their obligations under the contract. Properly executed and delivered agreements help prevent disputes and ensure smooth business transactions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.