Updated October 14, 2020:

Contract signing means that the parties signing the document agree to the terms in it and their contractual duties and obligations.

What it Means to Sign a Contract

There are important things to know when signing a contract. When you add your signature to the dotted line, you agree to the terms and to uphold your end of the bargain. Not all contracts require a signature.

In some instances, a verbal contract can be legally binding. However, if you want to protect your rights as much as possible, it's a good idea to put it in writing.

If you make an agreement that contains all the elements of a contract — such as an offer, intention, consideration, and acceptance — and both parties are competent to do so, you typically don't need a written contract for sums under $500. In this case, a signature isn't required.

Still, most experts agree that it's all too easy for parties to forget specific details of their agreement or disagree about the meaning, so again, it's better to get it in writing. Land sale contracts are required to be in writing.

Per the Uniform Commercial Code, when a contract involves an amount higher than $500 in exchange for goods, it has to be in writing. This section is commonly known as the statute of frauds.

Your informal writing — for example, a memo scribbled on a napkin which includes all required elements, plus signatures — may satisfy the statute of frauds. These types of signatures are unlikely to meet the requirements for real estate forms, however.

The smartest way you can handle contracts is to create a well-crafted document. Signing one online is a good idea because that way, each party has a legal copy and understands its responsibilities. You'll probably feel more confident signing a contract if your attorney drafts it for you or you draft it yourself and are intimately familiar with its language and terms.

What Does Your Signature Mean?

When you sign a contract, you're saying several things:

  • You've read the contract.
  • You agree to the contract's terms and conditions.
  • You intend to enter into the contract.
  • You're legally authorized to sign it.
  • You're mentally competent to sign it.

It's important to make sure that all blank lines are filled in and that you fully comprehend the terms. Get the other party's signature as well, along with a copy of the contract containing both signatures. If you sign a contract online, both parties will have a legal copy without all the hassle of copying, faxing, and shipping.

There are some instances when you shouldn't sign a contract, such as the following:

  • It has unfilled blanks, either a dollar amount, an item, or date.
  • You are under duress or feel threatened to sign it.
  • You don't understand something in it and wish to review it with your lawyer.

Contract Signing Protocol

You should be familiar with protocols surrounding contract signing if you want to execute a contract in a timely manner. This can help to expedite a business deal. Failing to follow formalities can cause unnecessary delays.

  • Final draft: Contracts go through several drafts before the final one. For a contract to be properly executed, both parties must have the final version to sign, not a draft.
  • Signatories: The appropriate signatory must sign the contract. A signatory is a company representative who's authorized to enter into, or terminate, a legally binding contract. This is often the CEO or president of the company.
  • Copies: Each party needs its own copy of the agreement, with original signatures on it. Two copies with two signature pages should be prepared. Each party should sign both pages and then receive an original copy.
  • Execution: Contracts aren't executed until both parties sign them. A contract is only partially executed when one signature is on it, and it's not binding. It's necessary to have the second signature on the contract to officially execute it and set an effective date for the agreement.

It's always a good idea to have an attorney look over a contract before you sign it. Not only can a lawyer explain any confusing terminology, he or she can also point out any red flags that signal a potential problem for you.

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