(p) Counterparts

The counterparts clause is one of the most remarkable miscellaneous provisions of modern common law practice. Although it has almost completely lost its necessity over the past century, it is still inserted into most contracts originating from those jurisdictions. For European continental legal systems, the clause is dispensable.

. What is the background of a counterparts provision? In common law countries[1], a defendant in court may require from a plaintiff that it provides evidence of the existence of a valid contract by handing over the original documents. If an original with the signatures of both parties or a counterpart with the signature of the other party could not be shown, 350 years ago, a court would have decided that no valid or enforceable contract was entered into. At that time, halfway the 17th century, contracts were drawn up in either of two manners: either as one document reflecting both parties’ rights and obligations and signed by each of them (and each party would receive an equal copy and both such copies would be considered to be an ‘original’); or as the combination of one document reflecting the rights of the lessor or seller (which document was called the ‘original‘) and one document reflecting the remaining rights and obligations (which document was called the ‘counterpart‘). The terminology refers to the physical presentation of contracts: the original and the counterpart were separated by a perforation for detaching the two counterparts. Each party would sign the other party’s counterpart (on which its obligations were reflected). At the turn of the 19th century, contracts were typed on paper with carbon copies behind it: the carbon copies were the counterparts of the one original. In those ages, something like a statutory countersigning requirement was understandable to prevent fraud.

It would suffice to hand over an original executed by the other party if the contract contains a counterparts clause:

Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same agreement.

Current necessity. Obviously, over the past centuries, common law courts have created numerous caveats and exceptions to the burdensome countersigning requirement. The idea behind the requirement was that under the (common law) Statutes of Frauds, strict formal requirements apply to the validity and enforceability of certain types of contract. To understand these requirements better, compare the formalities applicable on the European continent for vesting a right of mortgage or incorporating a company, which are subject to the notarial form. Because not all Statutes of Frauds have been modernised and case law is still relatively scarce, there is still no 100 percent certainty that courts will reject a party’s claim in court that there is no properly executed counterpart. Since a few decades, copiers and printers produce originals and their counterparts as if both are an original. This is when the counterparts clause became completely preposterous.

Even nowadays, American contract drafting books can spend pages on the uncertainties that various wording embody. When contracting with an American or common law party the advice is: insert the above simple clause and if the clause is marked up, accept it as amended.

[1] More specifically, under the ‘Statute of frauds‘ of those countries ….