Executing Contracts – the Who and the How

Useful for: Government, Local Government, Business, Non Govt Organisations

In Brief

  • It is important that contracts are signed by individuals who are properly authorised to do so by their contracting entity. Failure to execute in accordance with proper authority may result in losses arising from inability to enforce the contract, or legal action against the entity by other contractual parties, and for the individual/s that have wrongfully executed, internal discipline or other legal proceedings.
    Sole traders (and Trustees of Trusts that are individuals) simply sign themselves – with or without a witness, depending on the contract. The law is different across States and Territories so best practice dictates that a witness is used even if the type of contract doesn’t strictly require it.
  • For companies, the Corporations Act (Cth) 2001 sets out several methods of execution, (see sections 126 (individuals signing on behalf of a company) and 127 (execution by company officers).
  • Section 127 requires 2 directors or a director and a secretary to execute (or for a single director company, just that director if they are also the company secretary or there is no appointed secretary).
  • If a document appears to be executed in accordance with section 127, then a third party is entitled to make an assumption that the contract has in fact been properly executed and so long as there are no other legal problems with the document, it will be enforceable on its terms.
  • Where a contract is signed by an individual in accordance with section 126 (whether or not the individual is a director or not), it is prudent to carry out due diligence including a company search and the source documents that constitute the alleged authority, e.g. power of attorney/internal delegations (depending on the risk profile of the contract).
  • The ability to sign electronically now applies to documents (including deeds) signed by or on behalf of a company under section 126 or 127.
  • The “technology neutral” provisions mean that there is no mandate of the use of any particular type of technology for electronic execution of documents by companies. For example, a signature may be applied “wet” and the document scanned and emailed, or it may be executed using electronic means (for example a recognised electronic signing platform such as DocuSign or Adobe Sign, or signing a tablet with a stylus).

Buy Article

$66.00 per Article (inc GST)

You can purchase this article for $66.00.

Annual Subscription

$385.00 for 1 Year (inc GST)

You can purchase a subscription and get access to all articles right now.

Subscribe to access all Articles