UK: How Does A UK Company Execute An English Or Scots Law Contract?

Last Updated: 13 August 2018
Article by Elisha Hale

We are often asked by companies north and south of the Border how they should execute contracts.

In both countries, subject to certain important exceptions, there is no requirement for a contract to be in writing. Legally binding contracts can be formed orally (e.g. through phone conversations) or through a course of dealings.

But we'll assume here that we have two UK companies who have recorded their agreement in writing and are now wondering what has to be done to sign it.

What is the governing law?

The first thing to check is what law governs the contract.  If it's Scots law, then Scots law will govern how the contract should be executed. If it's English law, then the company must follow the English law requirements for execution.

There are subtle but important differences between the two.

The position in Scotland

The law is contained in the Requirements of Writing (Scotland) Act 1995. Technically, the execution requirements set out in this Act are only mandatory for certain special categories of contract.  But in practice we advise companies to follow them for all written contracts.

There are two types of execution: "valid" execution and "probative" execution.

"Valid" execution means what it says: if a company follows the requirements for valid execution, then the contract will be validly executed.

"Probative" execution takes you a step further. If a company follows the requirements for this, then a presumption arises that the contract was in fact validly executed. Should someone challenge this in the future, that presumption would put the burden of proof on the challenger to prove that the contract was not validly executed.

Lawyers, who are very fond of the belt and braces approach, will normally advise companies to go for probative execution. However, many companies may be happy to go with valid execution, particularly for low value, routine commercial contracts.

Requirements for valid execution by a company under Scots law

The contract must be signed on behalf of the company by a director, company secretary or authorised signatory.

An authorised signatory is anyone who has been authorised by the company to sign.  In practice, it will be the board who gives the authority to sign. The authorised signatory can be anyone at all – a manager, another employee or even a third party.

Requirements for "probative" execution

There are two ways to achieve this. The contract must be signed on behalf of the company either by:

  • a director, company secretary or authorised signatory and that person's signature must then be witnessed by someone else; or
  • two directors, two authorised signatories, or a director and the company secretary.

The position in England

This is contained in sections 43 and 44 of the Companies Act 2006.

English law permits contracts to be:

  • signed on behalf of the company; or
  • executed by the company.

Contracts signed "on behalf of" the company – English law

Section 43  of the Companies Act 2006 provides that, under English law, a contract may be made on behalf of a company, by a person acting under its authority, express or implied.

As a general rule, directors have implied authority to act on behalf of their company. Depending on the circumstances, other individuals (e.g. managers) might also have authority to sign particular contracts.

Where a person proposes to sign a contract on behalf of a company, depending on the nature, value or importance of that contract, the other party may wish to check before signature that the person does indeed have the necessary authority. They could ask for a board minute extract, or a letter from the board, confirming that the person is authorised to sign the contract.

Contracts executed "by" the company – English law

Section 44 of the Companies Act 2006 provides that, for a contract to be validly executed "by" the company, it must be signed on the company's behalf by two authorised signatories or a director of the company in the presence of a witness.

Rather confusingly, the English law definition of "authorised signatory" is much more limited than the Scots law concept. Under s44, an authorised signatory can only be a director or a company secretary.

So, for execution by a company under section 44, the contract must be signed by two directors, or a director plus a witness, or a director and the company secretary.

Which signing method to choose (English law)?

The appropriate signing method will depend on a number of factors beyond the scope of this blog. For example, English law deeds must be executed "by" the company (i.e. the section 44 method) as well as fulfil other requirements.

The section 43 ("on behalf of" the company) is potentially more flexible given the restricted meaning of "authorised signatory" under section 44.

If in any doubt, go for the "execution by the company" method (belt and braces again) or consult your legal adviser.

Where to sign

Scottish and English signing blocks differ in content and where they appear in the contract and there are differences regarding where they should be signed – please consult Brodies for information regarding this.

Internal checks

A final point: before anyone signs a contract for a company, consider whether there are any internal or external consents or approvals which are required.  Does the board (or anyone else within the company) need to approve the terms of the contract? Does the person signing have authority to sign a contract of this nature/value? Are any third party consents required (e.g. investors or lenders)?

How can we help?

No-one wants to end up in court over their contract. Certainly no-one wants to argue over a formality such as whether there was a properly signed contract in the first place.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions