What does Fully Executed mean?
When is a contract fully executed?
What are the important elements you should know!
In this article, we will break down the legal definition of Fully Executed so you know all there is to know about it!
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What does Fully Executed mean
What does it mean when you have a fully executed document?
When you say that a contract is “fully executed”, you can potentially refer to two different scenarios:
- It can mean that a contract is fully signed by the signatories directly or through their representatives
- It can also mean that the parties’ contractual obligations are accomplished or completed
The first scenario relates to “contract signature” and the second one relates to “contractual obligations”.
In the business world, we tend to use the term fully executed to refer to the status of contract signatures.
For example, if two companies are to enter into a commercial transaction, we can say that their contract is fully executed when the representatives of both companies sign and execute the contract.
Similarly, if there are three parties to the contract, the contract will be considered as a fully signed contract when all three parties sign the agreement.
Fully executed definition
How do you define fully executed?
An executed contract (or executed agreement) refers to the moment when all parties to the contract have signed the contract by apposing their signature on the document.
Typically, a contract is fully signed when the parties have read, negotiated, acknowledged and finally signed the version of the contract they agree to be legally bound to.
Fully Executed contract
A fully executed contract (or fully executed agreement) is a legally binding instrument outlining the contracting parties’ rights and obligations.
A contract can be formed either orally or in writing.
To refer to a fully executed purchase agreement or fully executed document, we are referring to the written form of the contract requiring the parties to sign the document containing the terms and conditions of their agreement.
For a contract to be validly formed in writing and enforceable in law, it needs to respect the contract formation rules applicable to it.
Typically, a contract is formed when:
- There is an offer
- The offer is accepted
- There is a consideration
- The object of the contract is legal
- The parties signing have legal capacity
The moment a written contract observes the formation elements and is signed by all contracting parties, it binds all parties to its terms.
Another important question is at what point in time is a contract legally binding?
Essentially, contracts are legally binding at the moment they are fully signed (unless the contract provides clear terms expressing otherwise).
This means that when all parties to a contract sign, the law will consider the terms and conditions of that contract legally applicable to them.
Fully Executed vs Accepted Offer
What is the difference between a fully executed offer and an accepted offer?
In Contract Law
From a purely legal perspective, what’s the difference between a fully executed document and an accepted offer.
In contract law, an offer does not necessarily need to be made in writing.
As a result, a contract can be legally formed (verbally) when an offeree accepts (expresses his or her acceptance) the offeror’s offer.
When we say “fully executed”, we are referring to when a contract was signed by all the contracting parties or when the obligations of the contracting parties were entirely completed.
When we say “accepted offer”, we are referring to the moment in time that the law considers a contract to be legally formed.
In Real Estate
In real estate, they both mean the same thing.
When an offeror makes an offer to purchase a real estate property, the offeror will unilaterally sign the offer.
If the seller agrees with the buyer’s offer, he or she will accept the offer by counter-signing the buyer’s signed offer.
When the seller counter-signs, the parties have a legally binding agreement where they commit to doing certain things to “close” the transaction.
Fully executed vs partially executed
What is the difference between fully executed and partially executed contracts?
The term fully executed can mean either when all parties to the contract have “signed” it or when the parties to the contract have “performed” their legal obligations.
Similarly, to say a contract is partially executed, we can either mean that the contract is “partially signed” or that a party has “partially performed” its legal obligations.
Let’s look at an example for each scenario.
Let’s take a transaction between a real estate owner looking to sell a commercial property.
To do that, the seller must enter into a real estate sales agreement with the buyer.
When all parties show up at the closing to sign all the required paperwork, we can say that the real estate aisles agreement is fully executed (or fully signed).
If you look at it from an “obligation” perspective, the seller has the obligation to transfer title to the buyer and the buyer must pay the seller.
When the title is transferred and payment is made, we can also say that the contract obligations are fully executed (or performed).
In the same example, if the closing documents are yet to be all signed, then we’ll say that the contracts are partially signed.
Similarly, if the buyer has paid the necessary sums but the seller has yet to transfer the title, we say that the obligations are still partially executed.
Fully executed agreement examples
Businesses interact with one another on a daily basis by entering into contracts.
In the business world, contracts are foundational to operating a business.
Contracts are highly versatile legal documents allowing businesses to define the specific terms and conditions they would like to adhere to.
Although here are endless types of contracts, we can group them into different categories.
Here are some examples of different types of contracts individuals, business entities, governments or other organizations can enter into:
- Purchase contracts
- Service agreements
- Real estate contracts
- Purchase of goods
- Loan agreements
- Financing contracts
Any type of contract that is signed by all parties is considered fully signed (for example: fully executed lease, fully executed purchase contract etc).
What is a fully executed contract?
Let’s look at a summary of our findings.
If you enjoyed this article on Fully Executed, we recommend you look into the following legal terms and concepts. Enjoy!
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