Be Careful How You Sign That Contract

Sometimes contracts are signed with great pomp and formality, almost as if they were trade agreements between great national powers. Sometimes contracts are signed with an off-handedness more apropos of a receipt at a fast food restaurant.

Can either of those signatures cost you hundreds of thousands of dollars? The key is what accompanies that signature.

Why your company name is important

The purpose of a contract is to avoid and anticipate disagreements. A good contract clearly states what each party will bring to the agreement and what each party will take from the agreement.

But what happens if the identity of each party in the signature block uses unclear wording or worse, uses no wording at all?

The result is a dispute if any provision of the contract isn’t met, and that’s exactly what the contract was supposed to prevent.

What is supposed to be in a signature block?

The signature block is the area of the contract where the signatories signs their names. In addition to the signatures, the block should also contain the names of the companies involved and the title or position of the signatories.

Typically, corporations, limited liability partnerships and partnerships are founded to protect their owners from liability. If an owner, partner or representative signs a contract without the contract explicitly specifying the name of the company, then that means the signer, not the organization, is liable for the terms of the contract.

That’s why it’s important for the signature block to include the full name of the company – not a shortened version, not a trade name or nickname, but the name of the company as it is registered with the state.

Does the signatory have the authority to sign the contract? That question should be answered by including the signatory’s title with each signature — owner, managing partner, treasurer or district manager.

If the name of the company is unclear, or if the signatory’s rights to sign the contract is unclear, then the purpose of the contract has failed. It has not avoided disagreement and now lawyers and judges must decide who is at fault.

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