The effective date is determined by the final date of acceptance. The final date of acceptance is the date on which the contract becomes binding between the parties. It is the date that both buyer and seller have agreed to all terms of the contract and have executed the contract. Four elements must be satisfied for final acceptance to take place:
1. The final contract must be in writing. (This is typically satisfied when negotiations are made using promulgated forms.)
2. The buyer and seller must sign the final contract, including the initialing of any handwritten changes to the initially drafted offer, if applicable.
3. Acceptance must be unequivocal.
4. The last party to accept must communicate acceptance back to the other party or the other party’s agent, if applicable.
The effective date is the date when the last element (communicating acceptance back) is made after the other three elements are satisfied. One reason why communicating acceptance back to the other party is mandated is so the other party will know when the contract performance requirements or periods for performance begin.