Execution clauses

If a contract is not executed properly, it may not be binding (subject to the common law rule of estoppel). Certain types of contracts must be executed in different ways in order to properly bind the parties. The way in which a document must be “executed” (i.e. made binding) will depend on a number of factors. For example, you will usually need to consider:

• Who is executing the document (e.g. an individual, a company or a person relying on a power of attorney).
• The jurisdiction(s) in which they are based.
• The law governing the contract.
• Type of document being executed (e.g. a simple contract or a deed). 

This will all determine the wording that needs to be used in signature blocks, as well as whether witness blocks will need to be included.

Foreign companies

Foreign companies must execute documents in accordance with the law in their own territories, which may differ significantly from the requirements that apply in England & Wales. For example, documents involving foreign contractual parties may need to be notarised or legalised and apostilled, whilst some jurisdictions may not recognise the concept of a “deed”. You should therefore always seek to obtain advice from local counsel when dealing with foreign contractual parties or legal documents governed by foreign law.

Notarisation, legalisation and apostille certificates: notarisation and legalisation are forms of legal certification which certify that a document or a signature is authentic or a true copy. For some countries, formal documents may need to be notarised (i.e. certified by a Notary Public) and then legalised (i.e. certified again by that country’s foreign consulate or embassy). International or cross-border finance transactions often require certain documents to be notarised or both notarised and legalised, particularly if the transaction involves a civil law jurisdiction (such as France or Germany). You can get certain official UK documents legalised by asking the Legalisation Office to confirm that the signature, stamp or seal is from a UK public official. The Legalisation Office will check the document, including whether the signature, stamp or seal is genuine. They will then “legalise” the document by attaching a stamped official certificate (an “apostille” certificate) to it, at which point the relevant document may be used overseas. You cannot use the UK service to legalise documents issued outside the UK however; such documents should instead be legalised in the country in which they were issued.

Simple contracts v deeds

You will likely deal with both simple contracts and deeds during a training contract and it’s essential that you understand when it is appropriate to use one over the other. 

To briefly summarise, a deed is a specific type of contract that must be used for certain types of arrangements, including transfers of land and the granting of powers of attorney. The execution requirements for deeds are more onerous than those for simple contracts (as explained in the next section). Unlike simple contracts, deeds don’t require the transfer of consideration (so deeds should be used to document binding agreements where consideration is not flowing between all the parties), and deeds also have longer limitation periods for breach of contract claims (12 years rather than 6 years).

It is also essential that you understand the respective legal requirements for executing simple contracts and deeds. We have provided a high level summary of these requirements below, however please don’t rely solely on this section when drafting execution clauses in practice. 

• Firms may have their own requirements for execution, including standard form/house style wording, so be sure to check your firm’s in-house standard form documents and any related style guides when working on execution clauses. 
• In addition, clients may have internal requirements for who should sign documents and how documents should be signed (for example, some companies may stipulate that larger contracts should always be signed “by” the company, and under the hand of at least two directors), so check this as well.

It is important to get the execution section right, otherwise the agreement may not be valid or binding. 

Execution clauses for simple contracts

A simple contract (i.e. a contract that is not a deed) is binding from the date on which the contracting parties intend for it to come into effect, which is typically the date on which the parties sign the agreement (although agreements may specify a future date on which the contract will take effect, which is commonly referred to as the “commencement date”). Note that with simple contracts, there is no legal requirement for the signatures to be witnessed. 

Execution of simple contracts by individuals

Each party to the contract will sign separate, identical copies of the same document. The signed copies will then together form a single binding agreement.

Signed by [name of individual]:  Signature of individual  

Execution of simple contracts by companies

For companies, simple contracts may be effectively executed by the signature of people authorised to contract on those companies’ behalf. In most cases, a company’s directors will have such authority, but it is worth checking the company’s articles of association to confirm this. Note that simple contracts can be signed by a company or on behalf of a company.

Signed by a company

Where a simple contract is signed by a company, this means that the company itself is taken to have signed the agreement. Subject to any specific rules that are set out in a company’s constitutional documents, there are three options for this:

1. Affix the company seal in the presence of two directors or one director and a company secretary, both of whom will sign to evidence that they were present

Executed by affixing the common seal of [name of company] in the presence of: 

     Signature of director                       Signature of director/secretary

             Director                                       Director/Secretary

2. Signed by two authorised signatories

Signed by [name of company] acting by [name of authorised signatory 1], a director and [name of authorised signatory 2], a [director/secretary]: 

Signature of director                      Signature of director/secretary

           Director                                        Director/Secretary           

3. Signed by a director in the presence of a witness

Signed by [name of company] acting by [name of director], a director, in the presence of [name of witness]: 

Signature of director                                   Signature of witness

           Director                               Name, address and occupation of witness

Signed on behalf of a company

Where a simple contract is signed on behalf of a company, this means that the company has authorised a person to sign on its behalf. In such circumstances, the company will be bound in the same way as if the signature had been given “by” the company. Subject to any specific rules that are set out in a company’s constitutional documents, here’s an example:

Signed by [name of director] for and on behalf of [name of company]: 

Signature of director

       Director

Execution of simple contracts under a power of attorney

Power of attorney: a power of attorney is a legal document that lets a person or company (the “donor”) grant an express power to one or more third parties (known as “attorneys”) to act on that person’s behalf or act in that company’s name and on its behalf. A power of attorney will set out the scope of the powers that are being delegated and attorneys must only act within this scope (otherwise the actions they take on a donor’s behalf may not be valid).

Signed by [name of attorney] acting for [name of donor] under a power of attorney dated [date]:

   Signature of attorney

Attorney for [name of donor]

Execution clauses for deeds

When executing documents as a deed, it’s important to properly fulfil all the execution requirements, otherwise the agreement may not be deemed binding by a court. Note however that If the execution requirements for deeds are not properly met, such deeds may instead take effect as simple contracts, provided that the requirements for simple contracts are satisfied.

Execution of deeds by individuals

Deeds must be in writing and it should be clear that the parties intend the document to operate as a deed (a deed is typically labelled as a “deed”, to help evidence such intention). When being entered into by individuals, deeds need to be executed by such individuals in the presence of a witness.

Signed as a deed by [name of individual] in the presence of [name of witness]: 

   Signature of individual                       Signature of witness

                                             Name, address and occupation of witness

Execution of deeds by companies

As with individuals, deeds being entered into by companies must be in writing and it should be clear that the parties intend the document to operate as a deed. Subject to any specific rules set out in a company’s constitutional documents, deeds may be executed both “for and on behalf of” or “by” companies, with the signatures of two authorised signatories (usually two directors, or a director and the company secretary) or the signature of a director in the presence of a witness. For example: 

1. Signed by two authorised signatories

Signed as a deed by [name of company] acting by [name of authorised signatory 1], a director and [name of authorised  signatory 2], a [director/secretary]:  

   Signature of director                  Signature of director/secretary

         Director                                   Director/Secretary

2. Signed by a director in the presence of a witness

  Signed as a deed by [name of company] acting by [name of director], a director, in the presence of [name of witness]: 

      Signature of director                 Signature of witness

            Director               Name, address and occupation of witness

Execution of deeds under a power of attorney

As with deeds executed by individuals and companies, deeds executed under powers of attorney must comply with the general execution requirements for deeds. Here’s an example:

Signed as a deed by [name of attorney] acting for [name of donor] under a power of attorney dated [date] in the presence of [name of witness]:

      Signature of attorney                                Signature of witness

Attorney for [name of donor]       Name, address and occupation of witness

Practical tips

The same person cannot sign a document both as a director and as the company secretary (i.e. one person alone cannot execute a deed in their dual capacity) and a party to a document cannot act as a witness to another party’s signature. 

Subject to these limitations, technically anyone of sound mind can act as a witness, and a signatory’s legal advisors often do so. However, best practice dictates that one side’s lawyers shouldn’t witness a counterparty’s signature, a family member shouldn’t witness another family member’s signature, and a person under the age of 18 ideally shouldn’t witness a signature, as such arrangements could give rise to an evidential burden if the validity of the document is later challenged in court.

Legal requirements and best practice aside, you should check whether the contract (or any related/underlying contracts) contains a “counterparts” clause, in case this specifies methods that can/cannot be used when executing the document.