Short Answer
Overview
In contract drafting, the word by is commonly used to denote the party who signs or executes the agreement, while its functions as a possessive pronoun referring to a party’s obligations, rights, or other attributes. The phrase “by and its” typically appears in clauses such as “executed by and its parties” or “by and its successors,” indicating that the act of signing binds both the signatory and the entity (or entities) represented by that signatory.
History / Background
The usage of “by” to signal execution dates back to early English common law, where a deed required a signature “by the hand” of the grantor to be valid. The possessive “its” entered legal drafting in the 19th century to clarify that certain provisions applied not only to the individual signatory but also to the entity they represented, such as a corporation, partnership, or trust. Over time, the combined construction “by and its” became a shorthand method to bind both the person signing and the legal person they act for.
Importance and Impact
Correct interpretation of “by” and “its” is essential for determining who is legally bound by a contract. Misreading these terms can lead to disputes over enforcement, liability, and the applicability of contractual obligations to affiliates, successors, or assigns. Courts often look to the plain meaning of these words, supplemented by the surrounding context, to ascertain the parties’ intent.
Why It Matters
For practitioners, understanding the nuance of “by” and “its” assists in drafting clear, enforceable agreements and avoiding ambiguity that could be exploited in litigation. For business owners and individuals, recognizing these terms helps ensure that they are aware of the full scope of obligations they are assuming when they sign a contract.
Common Misconceptions
“By” always refers only to the individual signing the document.
In many contracts, “by” can also imply authority to bind an organization, especially when accompanied by “its.”
“Its” only refers to property ownership.
“Its” in contracts is a possessive pronoun that can refer to rights, duties, successors, or affiliates of the signatory.
FAQ
Does "by" always bind the individual signer?
"By" binds the individual who signs, but when the contract includes "its" or similar language, the signature can also bind the organization the signer represents.
Can "its" refer to a corporation’s subsidiaries?
Yes, if the contract language expressly includes subsidiaries or affiliates, "its" can extend obligations to those entities.
What happens if a contract omits "its" after "by"?
Omitting "its" may limit the enforceability to the individual signer only, potentially leaving the corporation unbound unless other provisions indicate otherwise.
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