Due to the Covid-19 Pandemic, it has become much more difficult for parties to meet face to face to sign contracts. Businesses are working from home, and there are mandates for isolation and lockdowns. Regardless of the pandemic, businesses are increasingly tending towards working remotely. Therefore, it may be the case that the parties cannot have a physical meeting to sign the one document. With these factors in mind, companies must consider how they can sign a single contract, despite their geographic separation. This article will explore what split execution is and address some points to be aware of when signing documents by split execution.
What Are the Different Ways to Sign a Document?
Sometimes you can accept a contract online by ticking a box to indicate acceptance. For example, when you sign up to a new online platform, you will likely tick a box online. It will make you accept the terms and conditions before you can continue using the platform.
They will use an electronic document execution program to sign the contract digitally. Alternatively, they may place a digital signature into a document or digitally sign a PDF.
Split Execution
Another way to sign a printed document is to sign using ‘split execution’. Split execution happens where officers (people from the relevant company with the correct authority) sign different copies of the same document with wet ink.
When Does Section 127 Apply?
Section 127 of the Corporations Act 2001 (Cth) has specific requirements about how companies may sign documents to execute them properly. The company’s constitution may also have further requirements regarding how you can sign contracts, and who can sign them. The law states that a company can execute a document without using a common seal if signed by two directors, or a director and a company secretary.
There have been differing opinions as to whether, if a document is executed online, or in ‘counterparts’ (two versions of the same document), it has been validly executed.
Continue reading this article below the formThe Impact of Covid-19
In 2020, Coronavirus Economic Response determinations were made. One such determination introduced flexibility to deal with hardships caused by the pandemic. It announced that documents that must be signed under s 127 can be signed electronically or by split execution. Prior to this, there was debate as to whether companies could execute a document electronically or by split execution.
Practical Steps When Signing Documents by Split Execution
There are a few steps necessary when signing documents by split execution. You must:
- attach the signature, whether in wet-ink or electronic format, to the entire document. You can not separate the signature page from the rest of the document;
- keep copies of signed documents. Where you have signed documents by split execution, both copies should be kept;
- keep the entire document, not just the signature pages; and
- have a ‘counterparts’ clause in the document. This clause states that you may sign two copies of the same document and together, they form the one document.
Why is it Important to Make Sure That Both Parties Sign Your Contract Correctly?
If either party does not sign a properly, it may not be binding on the parties. There are many reasons why you would have a contract in place, including to:
- clearly outline the parties’ rights and responsibilities;
- address the division of risk between the parties; and
- set out the process fo resolving disputes.
If there is no valid contract in place, these factors will be in doubt. This often results in wasted time and money.
Key Takeaways
If you draft a contract correctly but do not correctly execute it, it may not be enforceable. Companies have their own requirements under the law as to how they must execute documents. However, even if you are not a company, best practice is always to ensure that anything you reach agreement on is:
- written down;
- signed; and
- dated.
A document in writing is always better than a verbal agreement where different memories of a conversation can lead to difficulties and dispute. If you need a document drafted, reviewed, or if you have questions about enforceability, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
Split execution occurs when officers, which are people from the relevant company with the correct authority, sign different copies of the same document with wet ink.
Documents to be signed by companies can now be signed electronically or by split execution. Before this, there was debate regarding whether companies needing to execute a document could do so electronically or by split execution.
It is important to remember that the signature (whether wet-ink or electronic signature) must be attached to the entire document. Additionally, you must keep copies of the signed documents, including the whole document, not just the signature pages.
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