Whether it's hiring a new employee or a new customer, signing a contract is an exciting time for yourself and your company. However, before you commit to signing a contract, it is important to understand the legal requirements of who can sign an agreement and how a document signed for the contract to be validly executed. This article explains who can sign legal documents depending on the type of contract you are signing and the context of the signature.
What is a signed contract?
A signed contract is a legally binding contract between two or more parties. The parties agree to the terms of the agreement and accept the contract's legal framework for delivering the services and resolving potential disputes. The parties accept liability should they breach the terms of the contract. A contract can be signed electronically or with wet ink if it is a written contract. However, the signature of a contract is only valid if the person signing the contract had the actual authority to sign the agreement. Before you enter into a contract, regardless of whether it is a simple contract or not, it is best practice to check whether the other party has the authority sign to avoid legal issues and unnecessary delays.
Who can sign a contract?
Authorised signatories can sign a contract on behalf of a party. The authorised signatory can be the party themselves (e.g a person), a group of people (e.g. jointly liable tenants) or a signatory of the party where the party is a person (e.g. power of attorney) or a company (e.g. director). If a signatory is signing on behalf of the party, it is important to understand what they are authorised to sign and the specific circumstances when they can sign. For example, a person act icing on behalf of another person via a power of attorney may only be able authorised to sign contracts related to certain matters for a fixed period of time. Certain documents might also require authorised signatories to have their signatures witnessed in order to be considered valid. Companies might also have execution requirements of legal documents specific to their articles of association and a person's authority to sign on the company's behalf might depend on the nature of the legal document they are signing.
Who can sign a contract on behalf of a company?
The directors of a company have the authority to sign legal documents on behalf of the company. A company secretary and employees with a certain position within the business might also have the express or implied authority to sign certain types of documents such as simple contracts, on behalf of the company. For example, hiring managers can usually sign employment contracts on behalf of the company in order to streamline the hiring process. When employees have the implied authority to sign, the business may require additional evidence to support the execution of the contract such as a witness or a supporting signature from a director, or another person in the company with apparent authority (e.g. company lawyer). A company may also require two authorised signatories depending on the nature of the written contract for a valid execution of that document.
Who can sign a contract as a deed?
In English law, a contract is signed as a deed if the contract is explicitly labelled as a deed and the authorised signatory executes the document in the presence of a witness. A key requirement of a deed is that the witness must sign below the authorised signatory's signature and that the names of the people signing are marked on the document to clearly identify their signatures. For example, legal documents such as a deed of guarantee or a power of attorney need to be executed as a deed to compensate the lack of consideration.
Electronic signatures and legal documents
Electronic signing has become the most common way to execute legal documents. Whilst most documents can be executed electronically, electronic signatures might need to meet certain requirements in addition to a company or a type of document's requirements for the document to be validly executed. For example, whilst the Law Commission has accepted that deeds could be signed electronically, deeds must be signed in the physical presence of a witness who attests the signature.
This article has explained who can sign contracts and how to know if a signature makes a contract validly executed or not. Company directors are authorised signatories and companies might require at least two directors to sign for a valid execution. Employees with a certain position in the company might also be impliedly authorised to sign documents on the company's behalf in order to streamline the execution of contracts. Finally, contracts can be signed by electronic signature but there may be conditions relating to the contract or the law for the execution to be recognised.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.