Signature Blocks and How They Affect Contract Validity
Recently, I sent my violin to New York for adjustment by a well-known luthier. When the violin came back, I looked at it closely before trying it and asked about the adjustments.
One of my questions related to the tailgut, which attaches the tailpiece to the button on the bottom of the violin. The tail gut is rarely noticed. It usually hidden under a chinrest and lies against the violinist’s neck when the instrument is being played.
Yet, the length of the tailgut determines critical distances in string placement, which can affect how pitches resonate. Excess material in the tailgut hidden under the tailpiece can affect the violin’s sound and may cause an unpleasant buzz. The tailgut material also affects the violin’s tone quality. Traditionally, tailgut was made of sheep gut, but now, tailgut may be made of nylon, Kevlar, stainless steel, or even titanium.
Although not hidden like the tailgut, at the bottom of most contracts are the signature blocks, which contain the parties’ signatures. Signature block set up and how parties sign contracts can affect validity and enforceability of contracts.
Yet, many people do not pay attention to signature blocks or how a contract is signed. Frequently I see contracts where a signature does not match the signature block or where the signature block is not set up correctly. Sometimes, parties never assemble a fully-signed contract and are at a loss when it is necessary to read the contract to clear up a dispute.
This article is one of a series on “boilerplate” and other frequently overlooked parts of contracts and other legal documents. “Standard” contract provisions have become standard for a reason–because they serve an important function in contract validity or interpretation. This article is about signature blocks and contract and document execution.
Signature Block Form
A typical signature block to a contract will include the following items, as illustrated below:
The name of the person signing the contract [Oliver Officer]
The name of the party on whose behalf the person is signing the contract [Prolific Purchaser, Inc.]
The party’s entity type and state of formation [Delaware corporation]
The capacity in which the person is signing [President]
The party’s function or position in the contract [Buyer]
The date on which the contract was signed (sometimes included) [November 15, 2018]
A line, which contains the actual signature of the person
The signature line described above might look like the following:
BUYER:
Prolific Purchaser, Inc., a Delaware corporation
By Oliver Officer .
Oliver Officer, President
Date: November 15, 2018
The state of organization and type of legal entity (e.g., corporation or limited liability company) is important to make it clear what entity is a party to the contract. Although legal entity names are unique within a state, there could an entity of same name formed in another state.
It is important that the individuals who sign contracts clarify that they are signing on behalf of a legal entity. This is done by including the word “By” before the signature and indicating the signer’s title underneath his signature.
The date on which the contract should be included to show the contract’s effective date. The date signed may be omitted if the effective date appears elsewhere in the contract.
Contract “Add-Ons”
Depending upon the type of contract, there may be additional formalities with the signature block. There might be witnesses or the contract might be notarized. Other times, the words “Under Seal” might be next to the signature. These “add-ons” have their places--and all are frequently misused.
Witnesses–Whether a legal document must be witnessed varies from state to state. When used, witnesses should actually see the person sign the legal document.
Typically, only documents that will be recorded (e.g., mortgages), wills, and sometimes government documents or powers of attorneys, must be witnessed. Many other times, forms or contracts have witnesses even though they aren’t required. Usually, this is to provide internal accountability so management of the other party knows which employee procured the document.
Notary–Whether a document must be notarized varies from state to state. There are two types of notarizations: a sworn statement or an acknowledgment. Acknowledgments are the most common and do not require that the notary see the individual sign the document (although the notary must talk with the signer later.)
Affidavits are an example of a sworn statement. The notary must witness the individual signing an affidavit. Sometimes, people put only a notary signature and seal on a document. A notary signature or seal without the sworn statement or acknowledgment language adds nothing to the document’s effectiveness.
Seal–Some contracts include the word “Seal” next to the signature. Attaching a corporate seal has the same legal effect. This is a reference back to the days when individuals, as well as corporations, had personal seals. In most states, the words “under seal” are archaic and unnecessary.
However, a few states differentiate between contracts under seal and contracts “not under seal.” For instance, in Maryland, where I am located, the statute of limitations for an action on a contract is nine years longer if a contract is “under seal.” In Georgia, all corporations must have a corporate seal on contracts for them to be recordable. Parties should not sign a contract “under seal” unless they know the legal consequences of that language.
Who Should Sign the Contract
One of the biggest mistakes in contract signatures is having the wrong person sign the contract. Individuals who sign contracts on behalf of a legal entity or other person should be careful both to indicate the capacity in which they are signing. They also should be sure they have authority to sign. Individuals who sign contracts without authorization may be personal liability to perform the contract.
If the contracting party is an individual, then that individual should sign the contract. If the contracting party’s attorney-in-fact is signing under authority in a power of attorney, the contract still should be signed in the name of the contracting party in a form similar to that above for the corporation:
BUYER:
Beatrice Buyer
By Patricia Personal Representative .
Attorney-in-Fact
Date: November 15, 2018
Some people erroneously think that marriage gives a person the right to sign contracts in the spouse’s name. That archaic belief dates to the time when women could not sign contracts. Now, an individual wishing to sign a contract in their spouse’s name must be named attorney-in-fact in a valid power of attorney.
If a legal entity is the party, the individual signing should be sure that the legal entity has given that person authority to sign the contract. Most corporation by-laws appoint officers and give them authority, which may include the authority to sign contracts. This is less common in limited liability company operating agreements. If there isn’t general authority, the individual should insist on a corporate or limited liability company resolution before signing.
Distributing the Signed Contract
Besides making sure that the contracts are signed correctly and have the appropriate “add-ons,” parties should pay attention to distribution of the signed contract.
Counterparts–Commonly, contracts are signed in counterparts. This means that each contracting party signs a different copy of the contract. This practice is legal, and most contracts include language authorizing counterpart execution.
In complex transactions, this has led to parties signing only signature pages and placing them into escrow while they continue to negotiate the contract terms. This practice, also, can be legal, if the parties signing the contract authorize it.
Rarely do contracts include language authorizing this practice, however. In those instances, there should be escrow instructions telling the escrow agent when to attach the signature pages to a final contract. If there are no escrow instructions, then each party should authorize attaching its signature pages to the final version of the contract.
Copies–Technology enables parties to create and distribute multiple copies of contracts. Many contracts contain a provision that states copies are as valid as the original. Although laws vary from state to state, usually, copies of contracts are as valid as the original even if the contract doesn’t say so.
Some legal documents do need to be in original format. Recordable documents, such as mortgages and deeds, must be originals. Promissory notes and wills also should be originals. Otherwise, a copy usually will suffice.
How Many Originals–Parties may sign multiple original copies of a contract so each party can have an original. Most of the time, this is acceptable, even though copies likewise also would be adequate. However, parties should never sign more than one original promissory note or will.
E-Signatures–Within the last several years, companies like DocuSign and Adobe Sign have made e-signatures popular. E-signatures are governed by a federal law called ESIGN, and many states also have e-signature laws. Although those laws are beyond the scope of this article, generally, e-signatures are appropriate only if the parties agree to it in writing. So far, recordable documents, notarized documents, and wills, among others, still cannot be signed using e-signatures.
Tailgut and Signatures Matter
There are many varieties of tailgut, and there are many ways to sign and deliver a legal document. Contracts may be signed by individuals or on behalf of another person or legal entity. They may be signed electronically or under seal. And they may be witnessed or notarized.
Like tailgut length and material, signature formalities for a contract or other legal document must be appropriate for the situation. Parties who overlook contract formalities as boilerplate may find themselves with unexpected problems, such as personal liability, an extended statute of limitations or even an invalid contract, in the same way as violinists who try to adjust their own tailgut can experience poor sound quality or damage their instruments. Just as violinists need luthiers to adjust their instruments’ tailgut, businesses should have an experienced business attorney prepare or review their legal documents before they are signed.
© 2018 by Elizabeth A. Whitman
Any references clients and their legal situations have been modified to protect client confidentiality.
DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information contained in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it unless and until a written contract is signed by all parties and any conditions in such contract are fully satisfied.