Key Takeaways:

  • Signing a contract is a legal affirmation of agreement to its terms and obligations.
  • Both verbal and written agreements can be legally binding, though written contracts are generally preferred for clarity and enforceability.
  • Contract signing involves multiple elements, including the presence of signatories, execution of the final draft, and copies for all parties.
  • Legal protocols and reviews by an attorney are highly recommended before finalizing a contract.
  • Digital contract signing can offer convenience and legal validation.

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.

Electronic and Digital Signatures in Contract Signing

Electronic and digital signatures are increasingly used in contract signing due to their convenience and legal acceptance in many jurisdictions. A digital signature, in particular, uses encryption technology to verify the signer’s identity and ensure the document hasn’t been altered. Both electronic and digital signatures hold the same legal weight as traditional handwritten signatures in most cases, provided they meet specific legal standards such as those outlined in the ESIGN Act (United States) and eIDAS Regulation (Europe). When choosing between electronic and handwritten signatures, consider factors like document type, jurisdiction, and the parties’ preferences.

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.

Common Mistakes to Avoid When Signing a Contract

To avoid potential disputes or legal issues, consider these common contract signing mistakes:

  1. Not Reading the Entire Contract: Ensure you understand every clause, as even small omissions can create significant issues later.
  2. Ignoring Incomplete Information: Contracts with blanks or missing details, like undefined payment terms or project scopes, are problematic. Always address incomplete sections before signing.
  3. Failing to Date Signatures: Missing or incorrect dates can affect a contract’s validity and make tracking obligations difficult.
  4. Assuming Future Changes: Don’t rely on verbal assurances or promises to modify the terms post-signature. Include all terms you agreed upon in writing.

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.

Key Elements of a Valid Contract Signature

A valid contract signature must include the following components to be legally binding:

  • Intention to Sign: The signatory must be aware that they are signing a legally binding document.
  • Signature Position: Signatures should be placed at the document’s end or on a designated signature page to ensure that the terms are fully acknowledged.
  • Witnesses or Notarization (if required): For specific contract types, like those involving large transactions, a witness or notary may be needed to verify the parties' identities and ensure the contract’s authenticity.

FAQ Section:

  1. Is a verbal contract legally binding?
    Yes, verbal contracts can be legally binding if they include essential contract elements. However, written agreements are recommended for clarity.
  2. What is the difference between an electronic and digital signature?
    Electronic signatures are general digital forms of signing, while digital signatures use encryption for added security and verification.
  3. Does a contract need to be notarized to be valid?
    Not all contracts require notarization, but it may be necessary for certain legal or financial agreements to add authenticity and avoid disputes.
  4. Who should sign a contract first?
    There is no strict order for signing. Typically, the party offering the contract signs last to finalize the agreement.
  5. Can a contract be changed after signing?
    Yes, but any changes should be documented in writing and signed by both parties to ensure the modifications are legally recognized.

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