Signed contracts are an essential component of financial and business transactions. They signify that the parties have reached an agreement and understand the terms contained within it. However, improperly signed documents can render the contract invalidated and affect your legal rights.
The article below outlines and details everything you need to know about signed contracts:
What is a Signed Contract?
A signed contract is a legally binding agreement. Parties sign contracts on the dotted line after negotiation discussions and upon reaching a mutual understanding. A contract’s signature tells legal decision-makers, such as judges and mediators, that you willfully entered into the agreement and were competent to do so.
Examples of signed contracts include the following:
- Business partnership agreements
- Commercial lease agreements
- Construction contracts
- Employment contracts
- Joint venture agreements
- Sales contracts
- Service contracts
While not a requirement, having a written and signed contract is always a wise approach for transactions exceeding $500 in value . By ensuring that you and the other party are on the same page, you can reduce the potential for future disputes.
Are signed contracts legally binding?
Yes, signed contracts are legally binding. They are legally binding when they meet the elements of an enforceable and valid agreement. These elements include an offer , acceptance , consideration , mutual obligation , and competency .
Elements of a signed contract
A legally enforceable contract is more than just a friendly promise. It specifies the provisions upon which both parties agree. If a dispute arises, judges and lawyers will review the original agreement to learn more about the issue.
Ensure that your documents contain the following elements of a legally binding contract:
- Offer : An offer is a promise to one party in exchange for consideration. Put the offer in writing since oral contracts and implied contracts are challenging to prove in the event of a dispute.
- Acceptance : Acceptance is the action of agreeing to the offer. The offer should clearly lay out the points that involve acceptance to ensure that everyone understands the terms.
- Consideration : Consideration is what one party gives up in exchange for the offer. It is usually compensation, such as money, equity, or acts of service.
- Mutuality : When both parties exchange an offer and consideration, the contract observes the tenets of mutual obligation. Contracts cannot be “one-sided” for them to be legally binding.
- Competency : Each party must be legally competent when agreeing to the contract’s terms. Minors and those with cognitive disabilities are not considered competent in the eyes of the law.
Contracts are essential in the business world. This assertion means that establishing a legally binding agreement is critical while ensuring that all terms and conditions are clear. Both parties must be aware, competent, and capable of entering into one to withstand validity tests.
What is included with your signature?
Signed contracts create legal implications. The most significant among them is that you agreed to the provisions and intended to enter the agreement. As such, it’s wise to review the terms when signing a business contract carefully.
The following is implied when you add your signature to a contract:
- You agreed to terms and conditions
- You read and understood it
- You were an authorized signer
- You were of sound mind
- You willfully signed it
It’s critical that you fill in all blank lines and understand the terms completely. Obtain the signatures of the other party and make signed copies. Distribute these signed copies among all parties and keep the original in a safe location.
Parties may also sign contracts electronically. The legality and enforceability of a digital signature won’t come into question unless there is an objection to the agreement’s validity. Several software programs use encryption to authenticate and document a digital signature.
Here is another article about signing a contract properly.
What terms are commonly found in a signed contract?
Signed contracts refer to a broad range of written agreements. When both parties sign the contract, they accept specific provisions that carry duties and obligations. These provisions will vary according to the transaction type, industry, scope, and parties involved.
However, these terms are commonly found in a signed contract:
- Arbitration clause : If you have a signed contract with an arbitration clause , then you agree to handle disputes outside of court and through the arbitration process instead.
- Choice of law clause : Signed contracts with choice of law clauses specify the jurisdiction that will handle legal disputes should one arise. Your signature shows that you agree to the jurisdiction selection.
- Confidentiality clause : If you signed a confidentiality clause , then you may not share proprietary or trade secret information about the other party.
- Definitions clause : The definitions clause outlines the meaning of specific terms. Your signature implies that you agree to the definitions and know what they mean.
- Indemnification clause : If you have a signed indemnification clause , then you agree to hold the other party harmless for actions arising from third parties.
- Severability clause : You further agree that the signed contract remains intact if one or several provisions become unenforceable with a severability clause .
- Warranties : By signed warranty provisions, you are stating that the terms and conditions are accurate as represented and that you will carry out your obligations in good faith.
As you can see, signed contracts carry multiple legal implications of which you should be aware. Doing so can reduce your exposure to breach of contract claims or other disputes brought forth by the other party.
Can you get out of a signed contract?
Yes, you can get out of a signed contract. However, the primary consideration when terminating a signed agreement is cost, and the most cost-effective solution is to renegotiate the terms amicably. If that strategy doesn’t work, you need to prove that the contract was unenforceable from the start or the other party committed a breach of contract .
Terminating a Signed Contract
Terminating a signed contract is never an easy endeavor. Some parties may readily agree to the request, while others may fight it. This outcome depends upon the scope, depth, and cost of termination.
Here are a few tips for terminating a signed contract:
- Carefully review the termination clause for options
- Contest the enforceability of the agreement with evidence
- Determine if the agreement is statutorily-compliant
- Have a reasonable conversation with the other party
- Utilize “cooling off” periods if they are available
As a matter of formality, contract termination notices should generally be in writing. Any verbal or phone conversation about terminating the agreement should also follow up with a written acknowledgment. Always check the contract for specific instructions, such as where to send the notice and to whom.
Why do you need to sign a contract?
You need a signed contract to authenticate its validity and enforceability. Your signature demonstrates that a bonafide deal took place, and all parties understood what they were doing at the time of signing. If you don’t have a signed contract in place, both parties expose the transaction to legal interpretation by lawyers and civil court judges.
Get Help with Contracts
Your state’s small business laws influence your signed contracts. While a contract template can help in a pinch, business contracts lawyers can offer you legal advice and guidance. Consider working with a legal professional today to avoid signing errors while ensuring that your contract represents your intentions. Post a project in ContractsCounsel’s marketplace to get bids from vetted lawyers if you need help.