Legal Guide to Executing Agreements in the UK

When executing agreements, such as contracts and deeds, it is essential to understand the relevant legal rules and best practices. ‘Execution’ refers to signing and formalising a contract or deed in a legally binding manner. Failure to execute a legal document correctly could result in a court deeming it invalid and unenforceable.. This article explains how to execute agreements in the UK.

Importance of Executing Agreements Properly

A legally binding contract generally requires:

• an intention to create legal relations;
• an offer and acceptance of the contract’s terms; and
• consideration (i.e., an exchange of something valuable between the parties, such as money, services, or goods).

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 and the date of agreement. A witness is not required for a simple contract, unless specifically requested by one party.

Individuals and Deeds

Notably, there are more specific legal requirements to validly execute a deed. 

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 in-person.

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. 

Limited Liability Partnerships (LLPs), governed by the Limited Liability Partnerships Act 2000, follow company-style execution rules rather than traditional partnership rules.

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.

Contracts Made on Behalf of a Company

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.

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

Deeds Made by a Company

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

• the company’s seal must be affixed to the document; 
• 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.

In addition, 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.

Electronic Execution of Contracts

With advancements in technology, electronic signatures are becoming more widely accepted. The Electronic Communications Act 2000 confirm that electronic signatures are legally valid in the UK, provided they meet authenticity and security requirements.

For most contracts, an electronic signature is legally binding. However, some deeds may still require physical signatures and witnessing in person. Always verify specific requirements for the type of contract you are entering into before proceeding

Key Takeaways

While executing agreements may seem like a formality, it is crucial for enforceability. A party may try to argue that an improperly executed contract or deed is invalid. To avoid disputes, always ensure:

• you understand the capacity in which you are signing (as an individual, partner, or on behalf of a company);
• you have the necessary authority to bind yourself or your business; and
• you follow the correct execution procedures for the type of agreement (simple contract vs. deed).

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