When does a contract become effective?

August 3, 2025

By Nadia Cabrera-Mazzeo, Esq.

Short Answer: On the Effective Date which is often when the last party signs the contract unless otherwise stated.

A contract becomes effective, that is, a contract becomes legally binding, on what is called the “Effective Date.” The Effective Date can vary, which is one of many reasons why it should be clearly stated in the contract when exactly is the Effective Date. There are several options for choosing an Effective Date:

1. 
The date when the last party signs the contract;

2. 
A future date that is stated in the contract;

3. 
A past date that is stated in the contract.

The Effective Date of a contract does not necessarily have to be a definitive date like “July 2, 2025.” It can refer to when something happens. For example, a contract can say that it becomes effective when the Buyer initiates a wire transfer to the Seller.

The Effective Date can also be retroactive. Perhaps the parties began their business relationship before they could finalize the contract but want the terms of the contract to apply to their relationship from the beginning.

In many cases, the contract states that the Effective Date is the date when the last party sings the contract. This is why it is very important that the parties write down the date when they sign the contract. If the signatures are not dated, you can look at other evidence to show that the contract was in effect at a certain point in time. It is better to make sure that the signatures have dates to avoid a messier legal situation. When the Effective Date is the date the contract is signed, then it aligns with the Execution Date, but those are not the same thing.

What does Execution Date mean?

“Execution” is a fancy word for the signing of a contract. An “executed” contract means a signed contract and an “unexecuted” contract means an unsigned contract. Thus, the Execution Date is the date the contract was signed. As stated above, this may or may not also be the Effective Date of the contract but they are not technically the same thing.

What happens if a contract doesn’t have a date?

Sometimes the parties neglect to sign their signatures and the contract has no date on it to speak of. As a contracts lawyer, I find this very frustrating! But even my clients who are lawyers themselves fall prey to this situation.

In such cases, to establish that a contract was effective at a certain point in time, we look for other documents, emails, etc. that are dated at that time that demonstrate an intent by the parties to be bound by the terms of the contract. Other evidence can also include testimony from the people involved with the contract. This can result in trying to piece together contract timelines years after the fact and can be difficult. A contract will not usually be invalidated because it lacks a date but everything depends on the specific circumstances at issue.

Law office of Nadia Cabrera-Mazzeo, Esq.

Small business and contracts lawyer

Based in Taos, serving clients throughout New Mexico

505 427 2025

nadia@honestcontracts.com

The information on this website is not legal advice and does not create an attorney-client relationship. The rates and fees listed on this website may not be the most up to date.