Last edited 15 Oct 2020

Contract execution

Contract execution is the process of signing an agreed contract, after which its terms become binding on the parties to the contract.

Contract engrossment is the process of preparing the final agreed form of contract and its schedules and appendices so that it can be executed. Engrossed contracts are then either executed under seal (signed by the parties, witnessed and most importantly made clear that they are executed as a deed) or under hand (a 'simple contract' that is just signed by the parties).

Simple contracts and contracts under seal have different limitation periods. An action founded on simple contract cannot be brought after six years from the date on which the cause of the action accrued. The limitation period for a contract under seal is 12 years. See Contracts under seal v under hand for more information.

Generally, two engrossed contracts will be prepared for execution, one for the client and one for the supplier. Alternatively, one party might retain the executed contract, with certified copies being issued to the other party, this can avoid potential errors in preparing two contracts for execution.

It is very important to ensure all details entered into the contract are correct before signing. It is surprisingly common for example for the wrong company to be named in the contract, and whilst the courts may see this as a clerical error that should be corrected, this should not be relied upon, particularly in the case of insolvency, and court proceedings in themselves are likely to be costly and time consuming.

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It is also relatively common for contract execution to be delayed until well after the actual works described in the contract have been started. Clearly this is not advisable.

Letters of intent are sometimes used as interim arrangements to mobilise a supplier prior to a formal contract being executed, but they should never be seen as an alternative to a full contract and should place a limit on expenditure and liability prior to the contract being put in place. See letter of intent for more information.