A legal “novation” is when a second contract is substituted for the original contract to reflect or correct terms in the initial drafting of the document.
The substituted contract remains effective as of the date the first contract was entered into.
This article will try to unpick the various legal threads of when you can and cannot back date documents, and what the consequences will be if you do.
The first and most important thing to note about the consequences of back dating a document is that it is potentially a criminal offence.
Meanwhile, the conflicting cases and legal theories have created uncertainty in one of the most important areas of automobile retail sales – the rewriting of automobile sales contracts – and highlight the contentious relationship between the auto industry and the law firm pursuing the backdating cases, the Rosner Law Firm of San Diego.
In the District, held that an auto dealer who placed the original date of the sale on a rewritten contract was “backdating” a contract in violation of certain state and federal laws.
In other words, if you sign that loan agreement today and its effective date is a month from now, you are bound to the agreement starting today even though you will not begin acting on it for a month.
Sometimes courts are asked to determine the effective dates of contracts that are completely undated.
For example, if you decide to loan money to a friend, you may draw up the contract after you’ve already made the loan, in which case you’ll want to backdate the contract, making it so that the interest started accruing the day you loaned the money.
Likewise, if you haven’t made the loan yet, you may set the effective date to a future date, so that the interest only starts accruing when the actual loan has been made.
The controversy over “backdating” of automobile sales contracts continues in California, despite a Court of Appeal decision last year that ruled against a new car dealer for engaging in such alleged practices.
Appellate panel later ordered a Trial judge to reinstate his initial decision in a case involving Raceway Ford, rejecting the backdating legal theory, despite the fact that the lower court’s ruling seemingly conflicted with .
Sometimes you will want the effective date to be different from the date of signing, either earlier (i.e., backdating) or later (i.e., predating).