Wednesday, November 21, 2007

Tips everybody should follow when signing a contract

You put it in writing, you aced the negotiations, and you are ready to execute the contract. Don't let down your guard at the last minute!
This suggestion comes from a business lawyer in New York. Imke Ratschko

1. Don't let technology (or anybody else) fool you

If the contract has gone through several rounds of negotiation and revisions, don't assume that the last circulated "execution copy" is what you think it is. Before you sign, be one hundred percent sure that you know exactly what you are signing (you'd be surprised how many people neglect this one).

2. Date the Contract

While a contract need not be dated to be valid and enforceable, it is kind of foolish to not date a contract. Dating helps to identify a contract years later and puts the contract into chronological context.

3. Both parties should sign the contract

It might come as a surprise to you, but in New York , unless a signature is required by statute, you don't necessarily have to sign an agreement for it to be valid. If you and the other party in some other way indicate consent to the contract, you are both bound.

However, nothing beats a solid signature from both parties when it comes to proving that a contract was entered into by the parties with an intent to be bound thereby. Better yet, put a provision into the contract that provides that the contract is not binding unless signed by both parties.

The signatures of each party to the contract do not necessarily have to appear on the same page of the contract, as long as you both agree that only the signature pages together constitute a complete executed agreement. To that end, parties to a contract sometimes include a provision that states "the parties may execute this contract in counterparts, each of which is deemed an original and all of which constitute only one agreement."

4. Initial last minute hand written changes to the contract

Any last minute change to a contract that is done by hand should be initialed by the parties to the contract. Better though, insist on a revised contract reflecting the change.

5. Sign in your correct capacity

If you are signing for an entity, make sure that the signature block properly identifies you. For example, if you are signing as president of a corporation, the signature block should read substantially like this:

ABC Corporation

By: _________________
Name: Joe Smith
Title: President

Signing correctly on behalf of a corporation prevents later claims that you are personally liable under the agreement.

6. Check the other party's authority to sign

For example, if the other party to the contract is a corporation, you want to be sure that the corporation is in existence, that the person signing on behalf of the corporation is authorized to do so, and, particularly in larger transactions, that the corporation approved the contract by consent of its shareholders or directors.

7. Get an original executed copy of the contract for your files

Each party should have an original executed copy of the contract for their files. In other words, if there are two parties to the contract, you have to execute two identical contracts. One copy goes to you, one copy goes to the other party. Each copy constitutes an original contract.

Imke Ratschko
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