In Short
- An incorrect signature does not automatically invalidate a contract; courts focus on the parties’ intent and the presence of essential contract elements.
- The principle of ‘substance over form’ means that minor technical errors, such as signing in the wrong place, may not affect a contract’s enforceability.
- However, resolving disputes over signature errors can be costly and time-consuming, so it is best to avoid them.
Tips for Businesses
To prevent contract disputes, implement a thorough review process before signing. Ensure all signatures are correctly placed, and consider using reputable electronic signature platforms to verify identities. For significant agreements, having signatures witnessed or notarised can provide additional legal assurance.
Signing your name on a contract generally signifies that you have entered into a legally binding agreement. However, what if a signature is incorrect? While an error may affect enforceability, it does not necessarily invalidate the contract. Several factors determine whether the agreement remains legally binding. This article explains what happens if you sign incorrectly and the implications of incorrect signatures in contracts.
Presumption of a Legally Binding Relationship
The law presumes parties entering commercial agreements intend to be legally bound unless demonstrated otherwise. Performing obligations under the contract, despite signature errors, strongly indicates an intention to be bound.
Essentials of an Enforceable Contract
For a contract to be enforceable in Australia, it must contain the following elements:
- offer and acceptance;
- consideration (exchange of value);
- intention to create legal relations;
- certainty of terms;
- capacity of parties; and
- compliance with formalities (e.g. written for some contracts).
When assessing the implications of incorrect signatures, courts will examine whether these core elements are present and whether the error affects any of them. While a signature error may raise questions about the parties’ intentions, if all other conduct aligns with the terms of the contract, this can demonstrate the required intention, overriding concerns about the signature itself.
Similarly, while a signature error might affect the formalities required for certain written contracts, this may not necessarily invalidate the contract if all other elements are clearly established and the parties’ conduct aligns with the agreement.
Continue reading this article below the formSubstance Over Form Principle
In line with the principle of favouring substance over form, Australian courts tend to prioritise the parties’ intentions and subsequent conduct over technical documentation errors, such as incorrect signatures. This approach aims to preserve the commercial relationships and agreements as the parties intended rather than allowing minor errors to derail their arrangements.
Case Studies
1. Partnership Dispute
If a partner claims that an incorrect signature invalidates their partnership agreement but has been acting according to the terms, their argument will likely fail. Their conduct demonstrates an intention to be bound. This overrides concerns about the signature error.
2. Wrong Signature Space
If a party mistakenly signs in the wrong space on a contract, they are unlikely to be bound to obligations outside their intended role under the agreement. Courts generally apply common sense to preserve the intended commercial relationship.
Electronic Signatures and Authentication
While electronic signatures are legally binding under Australian law, they can sometimes raise authentication issues. Effective electronic execution and e-signature platforms that verify the signer’s identity help minimise disputes arising from electronic signature errors.
Electronic signatures that require a witness will have to be witnessed properly. Each State has legislation that governs the use of electronic signatures and witnessing requirements.
Some steps to ensuring that a document is appropriately witnessed over electronic means include a video call with the person signing, being physically present when the document is signed and timestamps of when both the witness and signer execute the document.
Deeds
Accurate party names and signatures are particularly critical for deeds, which formalise promises without exchange. Without the exchange of consideration to indicate a binding intention, the formalities of a deed, including accurate signatures, become more crucial.
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.
Mitigating Risks
While signature errors do not automatically invalidate contracts, they can create unnecessary disputes and uncertainties. To mitigate these risks, it is advisable to:
- implement thorough review processes before signing any contract;
- clearly mark signature lines and ensure they correspond to the correct party;
- use dedicated signature pages that clearly identify the signed document or signed contract;
- use labels to identify where a party is required to sign and where the document needs to be witnesses (if required;
- consider adding initials for any essential pages of a document;
- for particularly important agreements, consider having signatures witnessed or notarised; and
- when using electronic signatures, employ reputable platforms with robust authentication measures.
Seek Legal Advice
While courts aim to uphold the parties’ intended agreements, incorrect signatures can still create legal uncertainties and disputes. If you are unsure about the validity of an agreement or are drafting contracts to minimise potential signature issues, it’s advisable to seek professional legal advice.
Key Takeaways
Getting the details right in a contract is the best way to ensure that people agree with total awareness of their rights and responsibilities. Also, getting a contract right from the outset is the best way to avoid future expenses and headaches. One of the details essential to a contract is contract signing. However, an error when signing a contract does not automatically mean it will become invalid. The intention of the parties involved largely determines the enforceability of the contract. However, it is best to put measures in place to prevent parties from disputes and the costly litigation process for Courts to question a signature’s validity.
If you have any questions about your deeds, contracts or agreements, 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
No, an incorrect signature does not necessarily invalidate a contract. Courts prioritise the intention of the parties and whether they have acted according to the agreement. If all essential elements of a contract are present, it may still be enforceable despite signature errors.
If you sign in the wrong section of a contract, courts will assess your intent. The contract may still be enforceable if your conduct aligns with the intended agreement. However, signing in an unintended section might limit your obligations to what was initially agreed.
We appreciate your feedback – your submission has been successfully received.
