There are many reasons that you might want to enter into an agreement. You might wish to buy or sell a business, an asset or property. Alternatively, agreements allow you to conduct business activities with certainty by assuring parties of their obligations. In some instances, you may wish to backdate a contractual agreement to fulfil a specific objective. In this article, we’ll discuss whether you can backdate a contract.
Main Principle
Generally, a person’s reasons for backdating a contract and how they record the backdating determine whether the backdating is legal. For example, if they backdate a contract to show an event happened earlier than it did to avoid tax the backdating is fraudulent. Similarly, the disclosure of any backdating is important because it ensures any future readers are clear on what the document means.
In summary, if your reasons for backdating are legitimate rather than fraudulent or deceitful, and the document is transparent about the backdating then it will likely be lawful. To identify whether the backdating is lawful or not it can be helpful to ask some of the following questions:
- What is the reason for backdating?
- Could the backdating harm another party?
- Does the backdating provide a special benefit to one of the parties?
- Does the backdating allow a party to avoid a detriment?
- Is the backdating happening to ensure compliance or avoid non-compliance with any law or regulation?
- Is the backdating disclosed in the document?
Above all, it is best to seek professional legal advice if you wish to backdate a contract. This is because the legality of backdating varies between circumstances.
Common Examples of Why Backdating Might Happen
Fraudulent Reasons
In some cases, a party might ask to backdate a contract for fraudulent reasons. This is illegal and can attract criminal penalties. This might happen to avoid a detriment such as non-compliance with a law or liability of some kind. Alternatively, it might be done to fraudulently benefit a party by avoiding tax.
Recognise an Oral Agreement
Sometimes parties backdate a contract to recognise an earlier oral agreement. This is a legal reason to backdate a contract. Ensuring this kind of legal backdating can be done by disclosing the backdating in the contract and checking the terms of the oral agreement are correctly transcribed.
To Recognise Some Other Form of Agreement
Similar to the above example, it may be appropriate to backdate a contract to recognise the earlier commencement of a party’s obligation. For example, if a supplier has already begun supplying a business prior to the execution date of a contract it may be appropriate to backdate it. This is an example of legally backdating a contract. As with all backdating, you should ensure its disclosed clearly and agreed upon by all parties.
Summary
In summary, backdating a contract is complicated. Any attempt to do so should be done with the backing of professional legal advice. That said, there are many circumstances where it may be common or appropriate to backdate a contract. However, in these circumstances, it is important to transparently record any backdating in the contract.
