Contract Signatory: Duties, Authority & Legal Implications

Content

• What is a signatory?
• Who can be a signatory?
• Co-signatory
• Authorized signatory
• What is the role of a signatory?
• Responsibilities of a signatory
• Can a signatory be changed?
• Why do contract signatories matter?
• How to set up a signatory
• Conclusion

Who signs a contract? Well, the obvious answer is the involved parties. If it’s a lease agreement, it requires the signatures of both the landlord and the tenant. What if it’s a business contract? Several parties are involved in the contracting process, including the finance department, legal team, and senior staff. In the final moment of truth, who has the authority to sign the contract? 

That’s where contract signatories become significant. The parties who place their signatures on legal documents play a vital role in the contract lifecycle. In this detailed blog post, we delve into the complexities of being a signatory, the responsibilities, authority, and potential ramifications of signing a contract.

What is a signatory?

A signatory is any person or legally recognized entity that signs a contract. It indicates their agreement and commitment to the contractual terms. Thus, the signatory becomes responsible for fulfilling the stipulations outlined in the agreement.

Signatories are essential to the execution and enforceability of a contractual legal agreement. A contract may have one or more signatories, depending on its type. They might take on various responsibilities and rights as written in the contract. For example, the signatory to a service agreement is responsible for ensuring the successful delivery of services. While individuals are the most common signatories, corporations, governments, and non-profits can also sign contracts through their authorized representatives. 

Who can be a signatory?

Any country, person, or organization can be a signatory. Legally, anyone who has reached the age of majority and is mentally competent can sign a contract. It generally includes individuals over 18 and companies or organizations through their duly authorized agents. 

The signatories must have the legal authority to bind the entity they represent. For example, corporate officers or individuals with a power of attorney can sign for a company. A board resolution or a specific company policy may dictate who can sign contracts, designating a role or individual as the official signatory. Entities must define who has this authority to avoid legal disputes. 

Co-signatory

A co-signatory, also known as a joint signatory, is an individual who must sign a document or authorize a transaction along with another party. In a business or organization, a co-signatory shares equal responsibility and authority with another individual when signing important documents or conducting financial transactions.

A co-signatory can provide an extra layer of security and oversight in sensitive situations. They ensure that there is a checks-and-balances system in place. Co-signatories become necessary for high-value transactions or contracts to mitigate the risk of fraud or unauthorized actions.

Authorized signatory

An authorized signatory is an individual who has the authority to sign documents or conduct transactions on behalf of a company or organization. The company's management team or board of directors selects them, and the company is legally obligated to abide by their signatures.

Authorized signatories typically have specific powers and limitations outlined in their authorization documents. They must guarantee the protection of the business's interests and that all transactions they approve adhere to the rules and policies of the organization.

What is the role of a signatory?

The role of a signatory extends beyond the mere act of signing a document. Signatories affirm that they agree to the contract's terms and are undertaking a commitment to uphold the contract's requirements. It means they are the ones responsible for the execution of the contractual terms and will be held accountable for the delivery of the obligations specified therein.

Responsibilities of a signatory

Before signing, a signatory must meticulously examine the contract. It is incumbent upon them to verify the accuracy of the information and to affirm that the contract is fair and equitable. A signatory should never sign a document they have not read or do not understand, as this could lead to unintended legal consequences.

Moreover, a signatory is often involved in negotiating the contract terms. If a signatory notices any discrepancies or has concerns about specific clauses, it is their responsibility to communicate these issues to the contract owner. The goal is to reach a clear, fair, and acceptable agreement before affixing signatures.

Once the contract is in effect, signatories must ensure that the actions taken under the contract comply with its terms. It's their job to oversee the execution of the contractual obligations and to confirm that their party is holding up its end of the bargain. Failure to do so can lead to disputes, legal action, and potential financial loss.

Can a signatory be changed?

There are times when businesses have to change a signatory even after execution. If the original signatory leaves the company or is no longer in a position to sign contracts, a new signatory may need to be appointed.
In mergers, acquisitions, or reorganizations, there may be a need to update the signatories on existing contracts. When such changes occur, it is essential to follow the contract's provisions for amendments to avoid any ambiguity regarding the authority of the new signatory.

Businesses must execute an amendment with the same formality as the original contract, including the agreement of all parties. It may require obtaining written consent from relevant stakeholders. The contract owner must confirm that the new signatory possesses the appropriate authority and ensure that the transition does not disrupt the contract's execution.

Why do contract signatories matter?

A clear understanding of the signatory role is imperative for all parties. Contract owners must select signatories with the legal capacity to act and who fulfill their contractual duties diligently. Signatories should know their responsibilities and the possible legal repercussions of signing a contract.

For signatories, comprehending the scope of their responsibilities is vital to avoiding legal pitfalls. Signing a contract binds the signatory and their party to the agreement's terms, including penalties for non-compliance or breach. It's a serious commitment with lasting repercussions.

Legal authority

The contract signatory must ensure contractual terms are legally binding and enforceable. It is essential to choose a signatory with the legal authority to represent the company and enter into agreements on its behalf. The signatory has to meet the basic qualifications for the contract to be valid or enforceable.

Clarity and communication

Selecting a contract signatory who is well-versed in the terms and conditions of the contract is crucial for ensuring clear communication between all parties involved. The signatory should be able to explain the terms of the contract accurately and address any questions or concerns that may arise during the negotiation process.

Accountability

The contract signatory is ultimately responsible for upholding the contractual terms and ensuring parties fulfill their obligations. Therefore, the signatory has to be reliable, trustworthy, and detail-oriented to prevent misunderstandings and disputes down the line.

How to set up a signatory

The days of printing, mailing, or faxing contracts for signatures are fading. There are now quick, secure, and eco-friendly signature alternatives available. Nowadays, the majority of companies choose to sign their contracts electronically. They allow users to sign legal agreements remotely and conduct paperless business operations. Electronic signatures are reducing the time and hassle associated with traditional contract execution. Moreover, they are legally binding in many jurisdictions, thanks to laws like the U.S. ESIGN and the European Union's eIDAS regulation. 

Setting up a contract signatory

It is effortless to set up signatories in electronic signature solutions. But before we get into that, organizations must pick a signature platform that meets their needs. They must consider factors like ease of use, integration capabilities, and security features. Businesses prefer a one-stop solution instead of depending on multiple platforms to carry out their contract management lifecycle.

For instance, Dock 365, contract management software built on Microsoft 365, offers seamless integration with electronic signature solutions such as DocuSign, Adobe Sign, and Sertifi. It enables users to design, negotiate, approve, and sign contracts from a single place.

After creating contracts in Dock 365, users can designate who needs to sign the contractual agreement. They can view the document and add signers or recipients without switching platforms. Users can also add messages for the signers. They must enter the names and email addresses of all signatories. 

The platform will prompt each signatory to sign the document in the designated fields. Businesses can monitor the status of the contract throughout the signing process. They can send reminders to prevent delays and receive notification when signatories sign the document.

Conclusion

The role of contract signatories is fundamental to the enforceability of any contractual relationship. Signatories must possess the necessary legal standing and a thorough understanding of their commitments. Companies must be careful who they choose to be signatories and ensure they know and understand all the contractual terms before they sign. 

Moreover, the signing process must be efficient and painless for quick execution. That is where the integration features of Dock 365 are convenient. They enable businesses to draft, negotiate, review, and assign signatories from one place. Signing contracts is fast and efficient with our secure electronic signature solutions.

Book a free demo to see Dock 365 contract management software in action.