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Signing a contract may seem like a mere formality to an agreement between you and another party. However, if you do not validly sign a contract, your agreement may not be legally binding. This article will outline how you can validly sign a contract with an individual or a company.
Individual
Deeds have different execution requirements from general agreements. To execute a general agreement as an individual, you will simply sign the document and add your name (and ABN if applicable) to the execution block.
Unlike deeds, there are no particular rules for signing an agreement as an individual. However, it is best practice to sign the agreement in the presence of a third-party witness for evidentiary purposes.
If you choose to have a witness sight your signature, your witness should:
- be 18 years or older;
- not be a party to the contract or receive any beneficial interest under the agreement; and
- be present when you sign the contract.
If you are signing a statutory declaration, your witness:
- should be an authorised witness (such as a Justice of the Peace);
- must be able to see your face; and
- must know you for 12 months or longer, unless they sight any original identity documents that you provide.
Different legal documents, such as leases and wills may have other execution requirements.
Partnership
The Partnerships Act of each state and territory governs how a partnership can correctly execute documents. Generally, a partnership will be bound to an agreement if one partner signs and executes a document relating to the partnership’s business. The signature should be witnessed by an independent third party and this same person can witness the signatures of all partners.
However, a Partnership Agreement (if there is one) can restrict the ability of one partner to bind the whole partnership and can put in place specific provisions. For example, a provision may require two or more partners to sign certain agreements.
Company
The Corporations Act provides ways that a contract can be validly signed by a company.
These methods include signatures by:
- directors and company secretaries;
- common seal;
- people with authority; and
- people with a registered power of attorney.
Directors and Company Secretaries
The most common way that companies execute agreements is to have the agreement signed by the directors and secretaries of the company.
A company has validly signed the contract if the signatures come from:
- two directors of a company;
- one director and one company secretary; or
- the sole director who is also the company secretary, for proprietary companies only.
Proprietary companies are privately owned companies that do not offer their shares on the stock exchange.
You must be registered as a director or company secretary when you sign the contract. State your full name and position underneath your signature.
If you are the sole director of a company, make sure you have registered yourself as the sole company secretary. Otherwise, you will not have validly signed the contract.
If you are unsure whether the other party has validly signed a contract, you can obtain the company’s details from the Australian Securities and Investments Commission (ASIC) register. The ASIC company extract (which you can obtain for a fee) will list the current directors and company secretaries of the company. If the person who signed the contract does not appear on the ASIC extract as a director or company secretary, the company may not have validly signed the contract.
Common Seal
Companies can also valid sign contracts by stamping the company common seal on the contract. Two directors, a director and a company secretary (or a single director if it is a one-person company) must witness the stamping. Furthermore, the seal must contain the company’s Australian Company Number (ACN) and the company’s registered name.
Signing with a common seal is uncommon. Large companies may use a common seal if signing major contracts or contracts with overseas parties.
People With Authority
A company can also sign a contract through an individual who has the express or implied authority of the company to bind the company under the contract.
Large organisations often use this method because it would be impractical for directors to sign every contract. The company appoints people as authorised signatories who can sign documents on the company’s behalf.
However, some company representatives (such as employees) may pretend to have that company’s authority when they do not. You could still rely on the signature of the contract if the person had implied to you that they had the authority to sign the contract as the company. However, if the company disputes the validity of the signature, you may get involved in a time-consuming legal battle over whether the contract should remain binding.
Therefore, if you are unsure if the person who has signed the contract has the authority, you should ask the company to provide evidence. The evidence can come from the company’s constitution or board meeting minutes. Ultimately, you must decide based on the evidence that the person has the authority before signing the contract on your end.
If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.
People With a Registered Power of Attorney
Alternatively, a company can sign a document through a registered power of attorney. A power of attorney is a legal document that allows someone (in this case, a company director) to appoint someone who can make decisions for them on their behalf.
Like authorised signatories, companies use this method to bypass the need for directors or company secretaries to sign every legal document. However, a registered power of attorney may be a more reliable way to establish the validity of a signature from someone who is not a director or company secretary.
A power of attorney can also help set out who can sign what documents and how many signatures are required.
For example, a power of attorney may provide that anyone who is a manager can sign as an attorney for contracts valued up to $50,000. However, two managers or one deputy director are required to sign contracts valued over $50,000.
You must register the power of attorney for the legal document to be valid.
For example, in New South Wales (NSW), you would register the power of attorney at the NSW Land Registry Services. When an attorney signs a contract, they must list the book and number of the registered power of attorney document. An authorised person, such as a licensed conveyancer, must witness the attorney’s signature.
Other states or territories may have different requirements. Additionally, a company does not have to follow the above processes. The company constitution can set out rules around how contracts are signed on behalf of the company.
Continue reading this article below the formKey Takeaways
You should be aware of the ways that you can validly sign a contract, whether you are dealing with an individual or with a company. You should also ensure that the other party to the contract has also validly signed. Otherwise, you may not have a legally binding contract.
If you need help validly signing a contract, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
An agreement that is not signed properly will not be considered executed and may not be legally enforceable. This means that it may be difficult to enforce the obligations of the parties to the contract. For this reason, you must follow the correct process when signing your agreement.
Having a witness sight your signature is not always a legal requirement. However, it is considered best practice for evidentiary purposes. For example, if a dispute arises, a witness may be called to give evidence about the circumstances surrounding the document signing.
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