How do you sign a contract?
This is a question our clients often ask, and for good reason. Signing contracts isn’t always as easy as it sounds, and can quickly become confusing if proper care is not taken.
In this article, we first lay out a few contract basics. We then take you through the process of how to sign a contract by addressing three critical questions.
While most of us have some notion of what a contract is, when used in a legal setting, the term can become more narrowly defined.
Broadly speaking, a contract is an agreement between two parties that establishes a legal obligation on them to perform specific acts. Each party is bound to perform the specified duties, which can include things such as rendering a payment or delivering goods or services.
A key requirement for any contract to be enforceable is that each party must exchange something of value (known as “consideration”). This doesn’t have to be monetary, but it does have to be more than nothing.
A contract can be used for a wide variety of transactions, including the purchase and sale of land, the sale of goods, or the provision of services. Contracts may be oral or written, though it’s important to keep in mind that the courts prefer that agreements be put in writing.
How to Sign a Contract – 3 Key Questions to Address
1. Does the contract need a witness?
A witness is a third party who signs the contract to verify the authenticity of the signatory of the legal document. Some contracts, such as business contracts, do not require a witness. Wills, while not technically contracts, require two witnesses.
2. Are you signing the contract personally or on behalf of a company?
If you sign a contract as an individual, you are personally liable for the fulfillment of the agreement. On the other hand, if you sign a contract on behalf of a company, you are not typically personally liable as the company is a separate entity. However, if you sign a contract on behalf of a company prior to its incorporation and the company ultimately fails to incorporate, you could find yourself personally liable.
The format of the signature block differs depending on whom you are signing for. If signing personally, you will sign above your name. When signing on behalf of a company, you will sign below the company’s name and print your name next to “Per” below the signature. (Please refer to the diagram below for illustrations).
3. Does the contract require a company seal?
A company seal is not typically required for an agreement to be valid. However, depending on the company’s articles, a seal may be required.
Depending on your answers to the three questions above, there are six possible signature block outcomes depicted in the diagram below:
Agreements can be binding even if they are not in writing – what matters is the intention of the parties to be bound. There are certain exceptions to this. For example, land agreements must typically be in writing in order to be enforceable, as per the Law and Equity Act. Many contracts also have terms and conditions that outline what is required to count as valid execution.
Electronic signatures are generally acceptable, as per the Electronic Transaction Act.
Article updated by Segev LLP’s articling student Eric Kroshus.
The above blog post is provided for informational purposes only and has not been tailored to your specific circumstances. This blog post does not constitute legal advice or other professional advice and may not be relied upon as such.
For more information, or to get in touch with one of our lawyers, please contact us at [email protected] or 1-800-604-1312