Legal Guide to Executing Agreements in the UK

When executing agreements like contracts and deeds, there are legal rules and best practices that are important to understand. ‘Executing’ refers to signing and completing a contract or deed. Otherwise, you risk a Court deeming your contract or deed invalid and unenforceable if you fail to execute it correctly. This article explains how to execute agreements in the UK.

Importance of Executing Agreements Properly

A legal contract occurs where:

• parties intend to create legal relations;
• there is an offer and acceptance of the contract’s terms; and
• parties provide consideration (i.e. the exchange of something valuable, like money). 

Notably, legally binding contracts are different from deeds. Deeds have different execution requirements to contracts.

Although a signed contract is not always essential, executing it correctly is crucial to avoiding future disputes. A person may argue that a contract is executed incorrectly and invalid or unenforceable if they want to avoid their obligations. Therefore, ensuring that you have signed the contract correctly allows you to avoid a future dispute about a small formality.

Individuals and Contracts

A simple contract does not have specific execution rules. Instead, the execution of contracts by individuals is flexible and straightforward and only requires your signature. A witness is not required for a simple contract.

Individuals and Deeds

The Law of Property (Miscellaneous Provisions) Act 1989 governs the process an individual must take to execute a deed correctly. Notably, there are more specific legal requirements to validly execute a deed than a contract. 

In practice, an individual wanting to execute a deed must sign it in the presence of a witness or the execution may not be valid. The witness will generally need to be an adult who is not a party to the document and should watch you sign the deed. 

An example of this is below:

Partnerships

The Partnership Act 1890 governs the process of executing agreements by a general partnership. Normally, an individual partner can sign contracts on behalf of the partnership. However, this depends on the legal capacity of the partner entering into the contract. It is, therefore always important to check the legal capacity of the partner before they sign anything. 

The execution block should include the signature of the partner and the name of the partnership they are binding. For example:

When it comes to a deed, there can be limitations on a partner’s ability to sign on behalf of the partnership. In practice, all partners in a partnership should sign the deed unless one partner has been given authority by the deed to sign independently. If all the partners are executing the deed, an execution block should be included for each partner, and each should sign in the presence of a witness.

The Companies Act 

The Companies Act 2006 details methods to correctly execute contracts, deeds and other documents. In particular, contracts created by a company or on behalf of a company have different execution requirements depending on when the company was registered.

Contracts Made on Behalf of a Company

When a contract is made on behalf of a company, a deed is not required. Here a simple contract is entered into by a person authorised to do so on the company’s behalf. A director will usually enter contracts, but this is not always the case. The signature must come from an authorised person.

Contracts Made by a Company

There are different rules for contracts made by a company (including documents and deeds). The requirements of the Companies Act must be followed, being that:

• the company’s seal must be affixed to the document; OR
• two directors or a director and the company secretary must sign the document; OR
• one director signs in the presence of a witness who will certify the director’s signature.

For a deed to be valid:

• the company must execute it; and
• the company must deliver the document as a deed. 

A deed is delivered when a party shows an intention to be bound by it, even if it keeps hold of the document. Generally, where a company signs a deed, the law presumes it has been delivered, but that presumption can be challenged. Some common examples of this form of execution can be seen below.

Common Seal

Another method of executing agreements is using the company’s common seal. However, this method is now less common. A company is no longer required to have a common seal, although it may choose to do so. The seal is an ink stamp pressed onto a document, symbolising the company’s acceptance of the document. The company must also comply with the provisions of its articles of association governing the use of the company seal.

In some cases, these forms of execution will not suit your particular situation. Accordingly, it is best practice to seek the advice of a lawyer who can provide you with specific guidance.

Key Takeaways

The presentation of the execution page of a contract may seem like an administrative formality with little significance. However, it is a crucial part of the enforceability of a contract. This is because someone may argue that a contract is executed incorrectly and unenforceable if they want to avoid their obligations. While the method of execution differs slightly for individuals, partnerships and companies, parties to a contract should ensure they understand:

• the capacity in which they are executing the contract (i.e. as an individual or on behalf of a business entity);
• who they are binding; and
• if they have the authority to enter into that contract.

For more information to assist you when executing agreements, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions