Contracts: The Proper Signatures

Nowadays there are many ways to sign an agreement including faxed and electronic signatures (both discussed below), or the old-fashioned approach with paper and ink. Whichever way you choose to proceed, it's important that both parties be listed properly – that is, the signature section should reflect the type of entity (corporation, sole proprietor, etc.) and the authority of the person (vice-president, general partner, etc.) A failure to do this can have severe consequences. Below we explain some of the details for listing entity and signing authority.

Individual/Sole Proprietors. A person is a sole proprietor if he or she is running a one-person business and hasn't incorporated or formed a limited liability company. If you or the other party are sole proprietors, you can each simply sign your own names because a sole proprietorship, unlike a corporation or partnership, is not a separate legal entity. If the business is a married couple doing business as a sole proprietorship, both spouses should sign the agreement.

Partnerships. A partnership is when two or more people run a business and haven't incorporated or formed a limited liability company. Partnerships may or may not have a formal agreement stating they are a partnership -- that is, many times, the law assumes that multiple parties working together as a business are general partners. If one party is a partnership, the agreement should be signed by a general partner on behalf of the partnership. Limited partners should never sign agreements since they have no authority to bind the partnership. Only one partner needs to sign. The signature block for the partnership should state the partnership's name and the name and title of the person signing on the partnership's behalf.

EXAMPLE: Chris, an IC marketing consultant, agrees to perform marketing research for a Michigan partnership called The Argus Partnership. Randy Argus is one of the general partners. He signs an agreement on the partnership's behalf like this:

Randy Argus

The Argus Partnership

A Michigan Partnership

By: ____________________

General Partner

Corporations. A corporation is a type of business entity that limits the owners' personal liability and which is sanctioned by and created under state law. If either party is a corporation, someone who has authority to sign contracts on the corporation's behalf, must sign the agreement. The corporation's president or chief executive officer (CEO) is presumed to have this authority. If the person signing doesn't have authority, the corporation won't be legally bound by the contract. The signature block for a corporation should state the name of the corporation and the name and title of the person signing on the corporation's behalf.

EXAMPLE: Kiddie Krafts, Inc. enters into negotiations with a competitor about a joint venture. An agreement is signed by the corporation's president, Susan Ericson. The signature block should appear in the contract like this:

Susan Ericson

Kiddie Krafts, Inc.

A California Corporation

By: _____________

President

Limited liability companies. Like a corporation, a limited liability company (LLC) is a type of business entity that limits the owners' personal liability and which is sanctioned by and created under state law. The owners of limited liability companies are called members. Members may hire others to run their company (called managers). An agreement with a Limited Liability Company should be signed by a member or manager.

EXAMPLE: AcmeSoft LLC, a limited liability company, hires Sally to perform freelance programming services and has her sign an agreement. The agreement is signed on AcmeSoft's behalf by Edward Smith, the company's manager. The signature block should appear in the contract like this:

Edward Smith

AcmeSoft LLC

A California Limited Liability Company

By: ______________

Manager

Dates. When you sign an agreement, include the date and make sure the other party does, too. You and the other party don't have to sign on the same day.

Final Changes to the Agreement. Sometimes it's necessary to make last minute changes to an agreement just before it's signed. If you use a computer to prepare the agreement, it's best to make the changes on the computer and print out a new agreement. However, it's not legally necessary to prepare a new agreement. Instead, the changes may be handwritten or typed onto all existing copies of the agreement. If you use this approach, be sure that all those signing the agreement also sign their initials as close as possible to the place where the change is made. If both people who sign the entire document don't also initial each change, questions might arise as to whether the change was part of the agreement.

Copies of the Agreement. Each party should retain a signed copy – if signing by ink, prepare at least two copies of your agreement. Make sure that each copy contains all the needed exhibits and attachments. Both you and the other party should sign both copies -- and each should keep your signed original.

Faxing Agreements. It is not uncommon for businesses to communicate by fax machine. One party signs a copy of the agreement and faxes it to the other who signs it and faxes it back. A faxed signature is legally sufficient if neither party disputes that it is a fax of an original signature. However, if the other party claims that a faxed signature was forged, it could be difficult or impossible to prove it's genuine, since it is very easy to forge a faxed signature with modern computer technology. Forgery claims are rare, however, so this is usually not a problem. Even so, it's a good practice for you and the other party to follow up the fax with signed originals exchanged by mail or air express.

Electronic Signatures. Electronic contracts and electronic signatures are just as legal and enforceable as traditional paper contracts signed in ink. Federal legislation enacted in 2000, known as the Electronic Signatures in Global and International Commerce act (ESGICA), removed the uncertainty that previously plagued e-contracts. An electronic contract is an agreement created and "signed" in electronic form -- in other words, no paper or other hard copies are used. For example, you write a contract on your computer and email it to a business associate, and the business associate emails it back with an electronic signature indicating acceptance. Since a traditional ink signature isn't possible on an electronic contract, people use different ways to indicate their electronic signatures, including typing the signer's name into the signature area (often with some grammatical "bookends" – for example /Robert Smith/ or "Robert Smith"), pasting in a scanned version of the signer's signature, clicking an "I accept" button, or using cryptographic "scrambling" technology. There are various ways to create an electronically "signed PDF" document and you can research current methods via your Internet search engine. Electronic signatures can also be created using coded cryptographic signature method. You can see a video on preparing electronic agreements.

Changing the Agreement After It's Signed. No contract is engraved in stone. You and the other party can always modify or amend your agreement if circumstances change and you both agree to the changes. It's advisable that an agreement be changed only by a written amendment signed by both parties. The amendment should set forth all the changes and state that the amendment takes precedence over the original contract.