Signing on the dotted line: how to get your contract across the finish line

We often find that clients will have worked hard negotiating contracts but once everything is agreed and the parties are ready to enter into the contract, they are not sure what the next step is. It is important that contracts are signed properly so that they are valid and binding. In this article, we explain how to “execute” (the legal terminology for the process of signing a contract and binding the parties to its terms) contracts subject to English law so that your contract does not fall at the last hurdle.

Please note that this article focusses on commercial contracts entered into between incorporated companies - there are different considerations if any of the parties to the contract you are entering are individuals, charities, LLPs etc.

It should also be noted that a contract can be formed in various ways – for example verbally, by conduct, course of dealings etc. However, an executed contract provides certainty for both parties and would always be our recommended method for formalising any business relationship.

What should you do before signing the contract?

Once the contract is in an agreed form, you should give it a quick check to make sure that everything is as expected and nothing is missing. It is not unusual to see contracts that have been in operation for a few years and find blanks that were never filled in or that numbering and clause references have gone awry following amendment. A quick read through should pick up these points and enable you to rectify the issue before the contract has been signed. 

While reading through the contract, check what kind of contract it is as this will impact on the execution processes you will need to use (see below). Commercial contracts are generally simple contracts, but they can sometimes be deeds. 

Not all contracts will need to be signed. Where there has been limited negotiation and you are contracting on the other party’s standard terms and conditions, you will often find that the contract is formed by actions (e.g., by placing an order) and does not require a signature. Sometimes you will not sign the contract itself but a related document such as the order form.

You should agree the execution procedure you want to follow with the other party so that everyone is clear on how the contract will be executed. 

What is the difference between a simple contract and a deed?

Both simple contracts and deeds are types of contracts. There are a few differences including that the limitation period for bringing claims under simple contracts is six years, whereas in contrast it is usually 12 years under a deed. English law requires certain contracts to be deeds (such as transfers of land, leases, and mortgages). However, sometimes contracts will be drafted as deeds for other reasons, such as where there are concerns around whether consideration (which is one of the legal elements required to form a binding contract) is missing or where the document grants a power of attorney. 

If your contract is a deed, it has to make this clear. The word ‘deed’ is likely to be mentioned at the top of the agreement and there will often be wording at the end of the contract stating something like ‘executed as a deed’ or ‘signed and executed as a deed by…’. There are other formalities for a deed but in this article we are focussing on the execution process. 

Execution formalities

Simple contracts and deeds can be executed by the company acting by signature of its directors. 

This requires either:

1. signature by two ‘authorised signatories’. Directors and the company secretary are the people who count as authorised signatories for this purpose; or
2. the signature of one director in the presence of a witness who attests the signature. 

If option b is used, then you will need a witness to sign the contract with their name and confirmation that they were present when the contract was signed. It is also common practice to include the witness’ name, address, and occupation next to their signature so that they can be identified and contacted if needed. The witness will need to be physically present when the contract is signed (witnessing signature over the phone or a video call is insufficient) and must be able to see the person signing add their signature to the document (whether this is watching someone sign their signature by hand or on a screen). The witness should be over 18, not visually impaired and of sound mind and they must not be a party to the contract being witnessed (or a signatory for another entity that is party to the contract).

Simple contracts only can also be executed on behalf of the company by an authorised person.

A simple contract can be executed by a person (who is typically a director) signing the contract on behalf of the company under their express or implied authority. This authority needs to stem directly from the company’s articles of association or (if the articles allow them to do this) delegation by a director. If this option is being used, then the signature box of the contract will usually state that the contract is being made ‘on behalf of’ the company by a person. 

A contract can be unenforceable if the person who executes it does not have the required authority so you should always check that the individuals signing actually have authority to do so. 

Deeds cannot be executed on behalf of the company by an authorised person.

Common seal 

It is also possible for a company to execute contracts using its ‘common seal’ but this is uncommon as many companies nowadays don’t have a seal, and this method tends to be more commonly used by institutions like local authorities. Before using a seal, consider the relevant sections of the Companies Act 2006 and check if your company’s articles of association include rules on how the seal can be used.

E-signatures and remote execution

If you want to go old-school and gather the parties to a contract in one place where everyone puts pen to paper to sign the contract, then this is still a perfectly valid way of executing a contract.

However, it is now commonplace for execution to take place remotely using electronic signatures. This can be done in a variety of ways from simply typing a name into a contract or using Adobe to insert a digital signature, to using an electronic signing platform such as DocuSign. 

If not using an electronic signing platform, you will need to consider the signature process you want to follow. For example, one party could sign the contract first and then send it to the other party for them to add its signatures and date the contract. Alternatively, counterparts could be used, which means that each party signs separate identical copies of the contract and then swap them. If using counterparts, all of the signed copies together form the contract. Counterparts can be particularly helpful where you have lots of signatories, but make sure that the contract states that execution in counterparts is permitted 

Other things to be aware of

• A contract cannot be backdated – this is fraudulent. A contract must be dated with the date of signature by both parties, or at a date after it has been signed when both parties agree it should be dated. If the parties started to perform their obligations under the contract before the date of the contract, this can be addressed by stating in the contract that it takes effect from an earlier date (but it cannot be dated with that earlier date).
• If any of the parties to the contract are based outside of England or Wales, their jurisdiction may have different requirements for signing contracts so advice should be obtained from a local lawyer to ensure that any formalities in that jurisdiction are complied with. 
• You should avoid allowing an individual (such as a PA) to apply the signatories signature to a contract for them as this can raise problems around whether the individual applying the signature has the authority to do so. 
• Your company or the other party may have internal procedures for the execution of contracts, which will need to be borne in mind when agreeing the execution procedure. 

What should you do once the contract is signed?

It is always worth checking the contract over to make sure that both parties have executed it correctly and that all the formalities have been complied with before the contract is completed. It is usually easier to resolve these issues while the ink is still fresh if you identify any problems.

Once both parties have signed the contract, you should make sure that you keep a copy of it safe.