What is an Executed Contract?

When contracting parties have signed a contract and both parties have done all they promised to do, it is called an executed contract or executed agreement.

Before performing services or selling a product, most commercial transactions and business engagements will result in a formal agreement between the parties. As a result, they’ll work out contract terms that are acceptable to both parties. Parties sign the contract when they are ready to give legal effect to their agreement and begin effectively performing their legal duties. When all parties sign the contract, and complete the actions associated with it, it is executed.

Its worth noting, most real estate transactions require execution. A sales contract, for example, is executed when the seller has transferred title to the buyer and the buyer has paid the seller. Execution must occur to finalize the agreement; without execution, a transaction is incomplete and therefore doesn’t exist.

Executed contracts tie back into the concept of the validity of a contract. For a real estate transaction to be valid, all parties must sign a legally binding contract and exchange something of worth. A proper real estate contract has four basic components. 

What is an Executed Contract Example?

Let’s look at this example. Say you are interested in buying your friend’s house. You both agree to sell it for a purchase price of $330,000. You create a legally binding contract that all the parties will sign to formalize the agreement. When the written agreement has been signed and solidified, and you get the keys, it becomes an executed contract.

Another example would be a lease agreement. Say you chose not to buy your friend’s house and decide to rent from them instead. You both agree on a lease term of one year and draw up a lease contract with your move-in date as the effective date. When the parties sign the lease agreement, you live there for one year, and the transaction is completed – it’s executed.

What is an Execution Date?

The execution date or date executed is the day the contract is signed. The effective date is the day the contract goes into effect. Both dates can both be found in a contract. In many instances, the execution and effective dates are the same; however, that is not the case in some circumstances.