The commencement date, also known as the contract effective date, is a term referring to the specific date and/or time when a legal document or contract takes effect.
But what does the start date of the service agreement mean, and why is it important for legal partnerships?
Before we go further, let’s expand upon what a commencement date is.
What is the commencement date?
The commencement date is the starting point of the day and time in which the involved parties become legally bound to the terms and conditions of the contract or agreement they signed.
The role of the commencement date in lease agreements
Having a commencement date is vital to any legal contract and key to project management.
In lease agreements, this defines when a renter has the right to keys and inhabiting their new home.
Having this date set in advance is helpful for both parties in terms of prep and planning, and can help cut down on the risk of confusion and legal disputes.
By having a commencement date, parties can clearly see milestones and determine whether or not contractual obligations are being met.
Importance of accurate commencement date in legal contracts
There is a legal significance to the commencement date in any contract.
It typically contains aspects beyond simply the “start” such as:
- Payment schedules
- Deadlines
- Contract expiration
- Termination rights
Having a commencement date allows the parties involved to have clear dates and be able to prepare as needed.
It keeps parties accountable and helps to mitigate risks like a termination due to a missed deadline or missed payment.
By having the date of commencement clearly laid out in the contract, challenges can be avoided in real-time like ambiguity with contract language and miscommunication between parties.
Commencement date vs signing date
There is an important difference between the commencement date and the signing date of a contract.
They may sometimes be the same thing, however it’s important to note that when signatures are executed don’t always mean a contract has commenced.
For example, say you’re looking to lease a new apartment.
You need to give 30-days notice at your current complex, so you ask for your move in date to be 30-days out from now.
The apartment complex will still proceed with the verification and approval process beforehand.
Once you’re approved and have paid the security deposit, they will send you a lease for signature.
In the lease agreement, it will clearly state the date of commencement for you to move into your new apartment.
In this scenario, it would be a month out. You may sign the new lease agreement on August 1st, but not have the right to move in until September 1st.
Where to find a contract’s commencement date
The commencement date is usually on the first page of a legal document. When drafting a contract, this is a good practice.
It could be included in the introductory clause, near the signature line, or may specify it’s when the last party signs the document.
If unsure, always ask for clarification on the date of commencement before signing a legally binding contract.
Is it possible to change a contract’s commencement date?
This depends entirely on the contract and circumstances at hand.
It may be changeable in the event the date was made in error, or the date needs to be moved due to circumstances beyond control.
The agreement of moving the date will depend on all parties involved.
The impact of commencement date on contract lifecycle management
Having a clearly defined commencement date allows those involved to be able to track performance more easily.
You can clearly determine when a contract has been breached, when a payment was missed, and more.
For larger scale companies such as residential apartment buildings operating with a high-volume of contracts, commencement dates give peace of mind.
Rather than trying to remember or manually track all the commencement dates, keeping them organized in PandaDoc makes them easily accessible by date.
In one of our customer success stories, real estate company newton offices elevated their contract management with PandaDoc.
By simplifying their organization, they were able to have a 10% increased close rate, and 63% improved productivity.
Titouan Petit, IT Manager at Newton Offices MancoThe collaborative workflows and easy-to-use interface make everything so much simpler. Their robust security and compliance features give me peace of mind. Overall, PandaDoc has boosted our productivity and streamlined our processes.
Organizing agreements with PandaDoc
With PandaDoc, you can easily see when the parties have viewed and signed your contracts.
As the commencement date approaches, being able to filter your contracts by status allows for optimization.
Your business operations can follow-up where needed and be alerted of contracts as they near their expiration date through contract automation tools.
Disclaimer
PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDoc services are governed by our Terms of Use and Privacy Policy.
