10 Considerations when signing a legally binding agreement

binding agreement

So, you’ve downloaded your template contract from Agreements Online. Great choice! Or perhaps you’ve had an agreement custom-drafted by a lawyer, or your business associate has sent you their contract to sign. The next step is for you to sign your binding agreement and throw it on top of your over-flowing filing basket, right? Wrong! If you have a legal contract in hand you’re certainly 90% there. But you still need to do a few things before your document can be considered a legally-binding agreement and ready to be implemented.

  1. Read the legal agreement thoroughly. A golden rule of contracts is to never sign a contract that you’re not completely happy with. So make sure that you read the terms of the agreement and that you’re comfortable with and understand each and every clause before signing it. A binding agreement is, well, binding! So make sure you know what you’re binding yourself to.
  2. Identify any clauses that you’re not comfortable with. Change them if you can. If you bought a contract or legal document from Agreements Online, you will get the document in an editable Word format. Feel free to make any changes that you may require. But we do caution you to be circumspect with your changes. If you don’t have legal training, you don’t have much experience dealing with written contracts, or your writing skills are not necessarily your finest quality, then try to minimise the changes that you make.

If somebody else sent you the contract, eg. your business associate or your drafting attorney, then make sure that any changes you make to the contract are highlighted, eg. by using track-changes before you add, change or delete any clauses.

  1. Fill in the blanks. Make sure that all relevant details are completed. This includes each party’s full or registered names, identity or registration numbers, physical addresses, email addresses. The domicilium citandi et executandi must be a physical address (not a postal address). And importantly, make sure that the details of any products, services, fees and charges are included and are correct.
  2. Check for any guidance notes and comments. Many of our documents have guidance notes and minor commentary added. And during the negotiation phase of finalising a contract there are often comments added to the draft agreement by various parties. Make sure that you have altered or deleted the applicable clauses as required by the guidance notes. And once consensus has been reached on the wording of the contract clauses make sure that you delete any commentary to ensure that your final legal and binding agreement also looks professional.
  3. Check the annexures, appendices, schedules and supporting documentation. If the contract makes reference to a supporting document (such as “Annexure A” or “Schedule B”) then make sure that the document is attached to the contract. And beware: these attachments are generally just as legally-binding as the written contract itself, so make sure that you read all the attachments carefully.
  4. Make sure there are no errors in the document. If you bought your template agreement from Agreements Online, you can rest assured that we take care in drafting our documents. Our documents and legal contracts are drafted in plain language with minimal cross-referencing and no Latin terminology. Before any document is added to our website we check it thoroughly to ensure that there are no spelling errors or ambiguities, the formatting is uniform, and any cross-referencing is limited. If you do happen to find any errors or inconsistencies in our documents then please Contact Us with the details so that we can correct it. And in the highly unlikely event that you find a major error in a document that you purchased from us, we will correct the error – and refund you the full amount that you paid for the document!

If you or your business associate have made changes to the document, make sure that you review the changes against the context of the rest of the agreement. Read the document carefully to ensure that these changes haven’t introduced ambiguities, created any conflict between various clauses or impacted any cross-referencing.

Be aware that not all lawyers are created equal. A concerning number of attorneys give their clients legal contracts that are littered with errors. Disturbingly common errors that we find in contracts, including contracts drafted by lawyers, include: spelling errors, improper use of punctuation, grammatical errors, cross-referencing mistakes, ambiguities, conflict between clauses; and (alarmingly) residue information from the previous client that the document was used for! So be sure to thoroughly check your contract for errors before signing it. And if you don’t know where the contract originated from, you may want to think twice before signing it! If your boyfriend’s business partner’s father was given a template agreement by a friend’s son who got it from a mate in second-year law school… then signing this document may not be the best of choices.

A note on spell-check: Spell-check is a useful tool, but cannot always be trusted. Sometimes your spell-check will change words automatically – which at best is frustrating, and at worst can materially change the meaning of the clause. There are some generally accepted words in legal agreements that spell-check insists should be changed (a common one being to change “therefor” to “therefore”). And check your spell-check settings to avoid words like “labour” becoming “labor”.

  1. Sign the contract. Once contract negotiations are complete and you are 100% comfortable with the agreement, it’s time to sign. Initial each page of the contract, including the annexures if there are any. Then make sure that you fill in your name, place of signature, the date, and sign – making sure that you’re signing as the correct signatory! If you’re “Party 1” in the agreement then don’t sign as “Party 2”.
  2. Get the witnesses to sign. If the contract requires witnesses, then the witnesses must also initial each page, fill in their details, and sign in the designated witness’ signature section. The role of a witness is to witness that the signatory did indeed sign the contract (ie. the signature isn’t fraudulent), the signatory was of sound mind at the time (and wasn’t intoxicated, for example), and that the signatory signed of their own volition (and wasn’t being forced to sign). So it’s important to ensure that the witnesses are readily identifiable (in case they’re called upon to testify in court that your signature was legitimate), eg. by the inclusion of their names, ID numbers and contact details.
  3. Collect together any additional documents. You make want to get additional documents, eg. a copy of the other party’s ID and residential address. Or if the other party is a legal entity, a copy of their incorporation documents together with a resolution authorising the signatory to sign.
  4. Store your binding agreement. Each party needs to get a copy of the completed and signed contract. And the signed contract needs to be safely stored in an accessible place. All too often we’ve been asked to give input on the validity and legal consequences of an unsigned contract. Then, when we ask for the signed copy we get told “Oh, we did sign it, but we don’t know where it is!” Businesses are required to sign legally-binding contracts regularly – sometimes on a daily basis. The importance of implementing (and adhering to) a contract management process cannot be under-estimated. You may also consider scanning your signed contracts into a designated folder on your computer. Preferably with an off-site back-up. Contracts should be kept at a minimum for the duration of the relationship or until expiry of the contract. And some contracts need to be kept for a few years after expiry. For example, employment contracts must be kept for a further three years after the employee’s last day of employment.

Following these ten steps will help you immensely when you’re concluding your legally-binding agreement. And remember, if you need a binding agreement, business contract or legal document then all you need to do is browse our wide variety of contract templates – and download your contracts online, with Agreements Online!

Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.

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