How to Sign a Contract

by Brian Rogers on January 8, 2013

in Contract Law Basics and Tips

Signing contracts correctly is important, not just as a matter of dotting i‘s and crossing t‘s. How a contract is signed can affect whether it’s enforceable and who’s on the hook. Here’s a basic “how-to” on signing contracts.

The correct legal persons should sign the contract

Only legal persons are parties to contracts. Legal persons can be humans (which are legally known as “individuals”) or corporations, limited liability companies, and other entities. As a general rule, if an entity wasn’t formed by filing a document with the Secretary of State, individuals are going to be on the hook for its contracts.

If you’re doing business as a sole proprietorship, that means you — as an individual — are the party to the business’s contracts. That’s the case even if you registered a fictitious name (or a “doing business as” name) with the Secretary of State. If I’m doing business as a sole proprietorship, I should sign contracts in my individual capacity, even if I’m doing business as, say, the Contracts Guy. So I should sign my business’s contracts as “Brian Rogers, doing business as [or d/b/a] the Contracts Guy.”

Entities can only act through agents because entities aren’t alive and they can’t actually do anything without help from humans. Although entities are legal persons for most purposes, they need human agents to act for them. Because an entity’s contracts are signed by a human, it’s important to be clear that the human is signing the contract on behalf of the entity and not in his or her individual capacity. So if I’ve formed a corporation through which to engage in my contracts business, I’ll sign its contracts as “THE CONTRACTS GUY, INC., a Missouri corporation, by Brian Rogers” (see the examples below for a better feel for how this should look in the signature blocks). If I’m doing business as “the Contracts Guy,” but the legal name of my corporation is “Brian Rogers Enterprises, Inc.,” the correct party to the company’s contracts is “BRIAN ROGERS ENTERPRISES, INC. d/b/a the Contracts Guy.”

The introductory paragraph and the signature blocks should match completely

Most contracts name the parties in the introductory paragraph. For example, if my corporation is entering into a consulting agreement with a law firm, the introductory paragraph might read as follows:

This consulting agreement is dated January 9, 2013 and is between ACME LAW FIRM, P.C., a Missouri professional corporation, and THE CONTRACTS GUY, INC., a Missouri corporation.

The names in the signature blocks for the two parties should be exactly the same as the parties’ names in the introductory paragraph, but note that Ken Adams’s Manual of Style for Contract Drafting recommends not stating the company’s jurisdiction of organization in the signature block. So if my corporation uses a fictitious name, the fictitious name should be included in both the introductory paragraph and in the signature block (the fictitious name should never be used instead of the company’s legal name in the introductory paragraph or signature block). For example, the introductory paragraph might read:

This consulting agreement is dated January 9, 2013 and is between LAW FIRM, P.C., a Missouri professional corporation, and BRIAN ROGERS ENTERPRISES, INC., a Missouri corporation doing business as the Contracts Guy.

Make sure you know the correct legal entity

It’s not always easy to determine a business’s correct legal name. On one end of the spectrum, an unsophisticated business owner might not have a clear grasp of the legal effect of a fictitious name or might not understand that his or her sole proprietorship doesn’t have a separate legal existence from the business owner. On the other end of the spectrum, large corporations often do business through hundreds or even thousands of affiliated entities. Determining the correct entity to list as the party to a contract can be a daunting task for a business person, as well as the legal department.

I always go to the records of the Secretary of State for help. A company can be found in the records of the state of its formation, its principal place of business, and often other states where it has a significant presence. The records of most states are searchable online for free or for a nominal fee (Texas nickels-and-dimes you and Delaware searches can really lighten your wallet, while Missouri and probably most states are free). At a minimum, a simple search will usually allow you to determine the exact legal name of the entity, the state of the company’s organization, and the name and address of its registered agent. Sometimes you can find much more information, such as the identity of the company’s officers and directors, whether the company is in good standing with the state, and even copies of its formation documents and annual reports.

Make sure the correct people are signing the contract

Because entities can only act through humans, it’s important to make sure that the human agents actually have authority to bind the company. While concepts such as apparent authority can sometimes bail you out of an unfortunate situation, it’s imprudent to rely on them. It’s a better practice to do enough due diligence to ensure that the signatory has actual authority.

In a very important transaction you’ll want to review the counterparty’s corporate documents to make sure the signatory is authorized by the company to sign the contract, as well as have the corporate secretary provide a document that certifies that a specimen signature is authentic. But that’s overkill in most commercial contexts, so basic due diligence is usually sufficient. Common sense can also help: it’s more likely that a company’s officers have authority to sign contracts for the company than the mail room person, and the president is more likely to have authority than the corporate secretary.

Katie Lane, who moonlights as a lawyer to small businesses and freelancers, has an excellent video on her Work Made for Hire blog, “How to Research a Company on the Interwebs,” that takes you step-by-step through basic due diligence, including searching the Secretary of State’s records. If you haven’t seen it, you should take a look — or at least skim the transcript.

Examples of contract signatures

Here are examples of signature blocks for different types of companies.

Sole proprietorship:

 

______________________________
Brian Rogers
Sole Proprietor

Sole proprietorship with a fictitious name:

 

______________________________
Brian Rogers
Sole Proprietor
d/b/a the Contracts Guy

General partnership:

Rogers and Rogers

By: ______________________________
  Brian Rogers
  General Partner

General partnership with a fictitious name:

Rogers and Rogers
d/b/a the Contracts Guy

By: ______________________________
  Brian Rogers
  General Partner

Corporation:

THE CONTRACTS GUY, INC.

By: ______________________________
  Brian Rogers
  President

Corporation with a fictitious name:

BRIAN ROGERS ENTERPRISES, INC.
d/b/a the Contracts Guy

By: ______________________________
  Brian Rogers
  President

Limited liability company:

THE CONTRACTS GUY, LLC

By: ______________________________
  Brian Rogers
  Manager

Limited liability company with a fictitious name:

BRIAN ROGERS ENTERPRISES, LLC
d/b/a the Contracts Guy

By: ______________________________
  Brian Rogers
  Manager

Limited partnership:

THE CONTRACTS GUY, LP

By: ______________________________
  Brian Rogers
  General Partner

Limited partnership with fictitious name:

BRIAN ROGERS ENTERPRISES, LP
d/b/a the Contracts Guy

By: ______________________________
  Brian Rogers
  General Partner

Limited partnership with a corporate general partner:

THE CONTRACTS GUY, LP

By: Brian Rogers Enterprises, Inc., its general partner

  By: ______________________________
    Brian Rogers
    President

[Updated January 9, 2013 and January 11, 2013: I made minor revisions to the signature block examples to conform to the Manual of Style for Contract Drafting.]

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