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Parties must correctly sign their contracts to avoid disputes down the track. The words ‘signing’ and ‘executing’ may be used interchangeably. Importantly, if you do not execute your contract properly, you risk a court deeming the contract to be invalid. The result is that your intention of the agreement will be unenforceable.
Depending on the type of vehicle (for example, a company or trust) entering into a contract, the rules may vary. Therefore, this article will explain how to execute your contracts correctly.
For Companies
There are three ways in which a company can sign a contract.
Firstly, a contract can be properly signed by a company through the signature of either:
- two directors of the company;
- one director and one company secretary; or
- for proprietary companies only, the sole director who is also the company secretary.
Secondly, an individual can execute a contract on behalf of the company. This is provided that the individual is acting with the express or implied authority of the company. A company may authorise an individual to contract on behalf of the company by way of the company constitution or by a board resolution.
Thirdly, a company can execute a contract by its attorney. Notably, a company must duly appoint this person under a power of attorney. However, note that this requires a formal process of appointment with strict documentation requirements.
For Trusts
Alternatively, under a trust structure, the trustee of the relevant trust must execute any contract. The execution block should explicitly state that the signatory is executing the contract in its capacity as trustee, or ‘as trustee for’ (‘ATF’) the trust.
Furthermore, if the trustee is a company, ensure you execute the contract in accordance with the rules for companies (explored above).
Subject to the trust deed stating otherwise, individual trustees will execute contracts similarly to the way individuals generally do. Therefore, where an individual trustee is executing a contract on behalf of the contract, it is best practice for the individual trustee to:
- print their name below the signature line;
- sign the contract in the presence of a third-party witness; and
- require the witness to sign and print their name on the contract for evidentiary purposes.
A factsheet that sets out the three ways to end a commercial lease in Australia: surrendering your lease, assigning it or subletting it.
Key Takeaways
It is important to ensure you execute your contracts correctly. Otherwise, they may not be enforceable. Therefore, for companies, the safest option is to correctly sign in accordance with the Corporations Act or by an attorney appointed under a power of attorney. For trusts, if the trustee is a corporate entity, you can follow the same general approach for companies. Alternatively, if the trustee is an individual, they should execute in the presence of a third-party witness.
If you need help with executing 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
Executing a contract is used interchangeably with signing a contract. Importantly, if you do not execute your contract properly, you risk a court seeming the contract to be invalid. The result is that your intention of the agreement will be unenforceable.
Companies have three options to execute a contract. First, either two company directors or one director and one company need to sign off a contract. Second, an individual acting with express or implied authority can sign on behalf of the company. Third, a company can execute a contract by its power of attorney.
For trusts, if the trustee is a corporate entity, you can follow the same general approach for companies. Alternatively, if the trustee is an individual, they should execute in the presence of a third-party witness.
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