Entry into force: Overview, definition, and example
What is entry into force?
Entry into force refers to the moment when a contract, agreement, or legal document becomes legally binding and effective. This is the point at which the terms and obligations set out in the document begin to apply to the parties involved. The entry into force can be triggered by various events, such as the signing of the document, the completion of a specific condition, or the passage of a certain period of time. Often, contracts will specify the entry into force date, or it may be linked to a particular event, such as regulatory approval or the fulfillment of preconditions.
For example, an agreement might state that it will enter into force 30 days after both parties sign it, meaning that after the 30 days, the agreement becomes legally enforceable.
Why is entry into force important?
Entry into force is important because it marks the moment when the legal obligations of the parties begin. Until that point, the parties are not bound by the terms of the agreement, and they may freely negotiate or change the terms. For businesses, understanding when a contract enters into force is crucial because it defines when the company’s responsibilities, rights, and any liabilities outlined in the agreement start to apply. This also impacts when the parties can take legal action to enforce the agreement if necessary.
For businesses, clarifying the entry into force ensures that there is no confusion about when specific actions or obligations should begin.
Understanding entry into force through an example
Imagine two companies enter into a licensing agreement. The agreement specifies that it will "enter into force on the 30th day after both parties sign the agreement." On the 30th day, both companies are legally bound by the agreement’s terms, such as licensing fees, restrictions, and other obligations. Until that time, neither company is required to adhere to the terms of the agreement.
In another example, a business signs a contract for the supply of goods but specifies that the agreement will only enter into force after it receives approval from a regulatory body. Until approval is granted, the business is not obligated to fulfill its obligations under the contract.
An example of an entry into force clause
Here’s how an entry into force clause might look in a contract:
“This Agreement shall enter into force on the later of [Insert Date] or the date on which the last required regulatory approval is obtained. Until such date, neither Party shall be bound by any of the terms of this Agreement.”
Conclusion
Entry into force is a crucial concept in contracts and agreements, as it specifies when the rights and obligations outlined in a document become legally binding. For businesses, understanding and clearly defining the entry into force ensures that there is no confusion about when the terms apply and helps manage expectations about when obligations begin.
For businesses, carefully specifying the entry into force date in contracts is essential for clear and efficient business operations, particularly when dealing with conditions or timelines that impact the agreement's activation.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.