FH Partners argued on appeal that, although the FDIC didn’t own the loan on December 16, 2008, the FDIC’s backdated transaction with Weatherford remedied the problem retroactively.
The appellate court determined two separate issues: (1) whether the FDIC’s June 10, 2009 transaction with Weatherford was effective to retroactively transfer the loan to the FDIC as between the FDIC and Weatherford and (2) whether a retroactive effect applied to the FDIC’s earlier transaction with FH Partners.
It’s not unusual for parties to a contract to want the written agreement to cover a period before it’s actually signed.
There are any number of contexts where this comes up — some legitimate and others not exactly aboveboard — but the logistics of negotiating and signing contracts are such that the issue is unavoidable.
FH Partners was unable to cite to any authority “for the proposition that a retroactive effective date in one contract can be construed to have an automatic retroactive effect on a separate contract,” which would probably have been fatal to its case.
But the language of the FDIC/FH Partners agreements further undermined FH Partners’ arguments because the documents (1) stated that they couldn’t be amended or waived except in a writing signed by the parties, (2) didn’t anticipate that the FDIC could modify what it was conveying to FH Partners after closing, (3) conveyed the FDIC’s interest “as of the Loan Sale Closing Date,” (4) transferred the FDIC’s interest in the loan “as is,” (5) provided that the FDIC would “have no obligation to secure or obtain any missing intervening assignment or any assignment to [the FDIC] that is not contained in the Loan File,” (6) provided a process by which FH Partners could require the FDIC to repurchase a loan if it was determined that the FDIC didn’t own it as of the closing, and (7) transferred the FDIC’s rights “at the time of closing.” The appellate court stated, “We necessarily conclude that the FDIC/FH Loan Sale Documents unambiguously anticipated that the FDIC might very well be conveying to FH Partners less than perfect, and even non-existent, title to Loan A and Loan B.
Disordered, untimely paperwork was cited as the cause in some cases of unintentional backdating.
The appellate court affirmed the trial court and stated: The law does not support the blanket conclusion that a retroactive effective date in a contract is only enforceable when the evidence demonstrates that the parties had agreed to the material terms of their contract as of the retroactive date.
Options backdating is the process of granting an option that is dated prior to the actual issuances of the option.
In this way, the exercise price of the granted option can be set at a lower price than that of the company's stock at the granting date.
Even if a transaction is given retroactive effect as between the parties, it’s unlikely that the same will be true when non-parties are involved.
It’s often difficult — maybe impossible — to conceive of all the non-parties who could be affected by a transaction, so it’s non unlikely that there will be unintended consequences that won’t be cured by backdating a contract.