Counterparts

The Jolly Contrarian’s Glossary The snippy guide to financial services lingo.™ →Go uptown Index — Click the ᐅ to expand: Glossary Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Outside the arcane and stupefying word of conveyancing, a counterparts clause is, more or less, a total waste of space.

Black’s Law dictionary has the following to say on Counterparts:

“In conveyancing. The corresponding part of an instrument; a duplicate or copy. Where an instrument of conveyance, as a lease, is executed in parts, that is, by having several copies or duplicates made and interchangeably executed, that which is executed by the grantor is usually called the "original," and the rest are "counterparts;" although, where all the parties execute every part, this renders them all originals.”

There are some situations where it is important that more than one copy of a document is recognised as an “original” - for tax purposes, for example, or the agreement needs to be formally registered with a land registry or some such thing. But these cases are few and far between — non-existent, indeed, when the field you are ploughing overflows with flowering ISDA Master Agreements — and the rest of the time a counterparts clause (like the one in the ISDA Master Agreement) is pure flannel, and flannel which may lead cautious counsel to insist on one wherever she can’t see one, on pain of demanding every person gets around the same table and indelibly marks the same parchment with a feather quill.

THIS IS NONSENSE.

Outside the formal requirements of execution — deeds of lease (that is, not more normal deeds), contracts for the conveyance of land, that kind of thing — for any other type of legal agreement to be enforceable you need only fall back on your first contract law lecture.

You need:

• offer
• acceptance
• consideration

Here we are talking about acceptance. Acceptance does not require a quill. It does not need a signature (digital or otherwise) at all. One may accept orally, by gesture, or even just by behaving in a way that can only be explained by reference the putative contract being argued about. All a counterparty needs to do is satisfy a court that one communicated acceptance.

Signature is about evidence of that acceptance. Parties signing different copies of the same contract is no less compelling evidence than both signing the same one.

Note, also, that where formal execution requirements do require every hand to besmirch the same physical parchment, a counterparts clause won’t save you. This is deep magic, and no beginner’s spell will shoo it away.

See also

• In your face
• Counterparts and Confirmations - ISDA Provision