Whenever you enter into an agreement in your personal capacity (for example, not as a director of a proprietary limited company or as an employee), it is important to ensure you execute documents correctly. Failure to execute documents correctly may mean that they are not legally enforceable. This is also important when you are a sole trader. As a sole trader, you run a business in your personal capacity and there is no separation between assets of the business and your personal assets. This is distinct from a company, where the assets of the owners of the business are separate from the assets of the business.
The requirements for execution of documents by a natural person depends on the type of document in question. For example, there are specific requirements for the execution of a will.
General Agreements and Common Contracts
When you enter into a common contract, there are no special rules which stipulate how a person must execute the document properly. However, you should think about two ‘best practice’ procedures to have in place when you execute documents as a natural person. Firstly, it is good practice to ensure that you have a witness to your signature. As the name implies, the witness should be in your presence when you sign (‘witnessing’ your signature). The witness should then also sign the document as evidence that they have witnessed your signature. Lastly, the witness should not be a party to the document.
Wills are an essential component of estate planning and have specific execution requirements, depending on the relevant state or territory rules.
Section 9 of the Wills Act 1968 (ACT) is a typical statement of the requirements for executing a valid will.
A will is not valid unless it is:
- in writing
- signed at the end of the document by the testator, or by another person in the presence of and by the director of the testator; and
- the signature of the testator is made or acknowledged, or the signature of the person who signs the will by the direction of the testator is acknowledged, by the testator in the presence of 2 or more witnesses present and the same time; and
- two or more of those witnesses each attest that signing of the will or that acknowledgment of signing of the will and subscribe the will in the presence of the testator and the other witness or witnesses.
While there are generally no specific requirements for how a document should be executed by a natural person (unless the document is a special type of document such as a will) it is best practice to have the execution of the document witnessed.