Who should be signing a contract and how to reflect this? The signature block should identify the name of the signatory and, preferably, the legal position of the signatory. This position is important in order to be able to establish whether or not the contract party was duly represented at the time of entering into the agreement.
Defects in the representation of a company can often be repaired by a board resolution of the quasi-represented party in which the entering into of the agreement is ratified. (Since the First European Directive on company law determines that only the represented company can invoke undue representation, such ratification merely protects the representative and may be of convenience for the other party.) Obviously, agency law related to the question of whether a company has been bound by an agreement may well protect the counterparty against undue representation and it is good practice to reflect this under the signatory line (i.e. the signatory should himself or herself be liable if the description is untrue).
Mentioning a signatory’s function or title. The wording identifying the signatories’ respective legal position should be consistent with the requirements for representing the company. Normally, the articles of association of the companies involved establish how the relevant company can or must be represented. If the articles require that only the president or chief executive is authorised, the signature block should reflect this. If the articles authorise each managing director, the signature block could refer to the signatory as the managing director as well as to his or her specific position as chief executive or president.
Powers or attorney and internal contract approval policies. If the agreement is executed by a person authorised on the basis of a power of attorney, the signature block should identify the signatory as Attorney-in-fact. In many companies, there are contracting policies in place authorising business line managers to enter into less significant contracts; such policies should be set out in a power of attorney. In such cases, the authorised person is often identified by reference to the business position rather than as an attorney-in-fact.
(Limited) partnerships. If a partnership is a party to the agreement, the signature block should clarify how and by whom the partnership is represented. As with corporate legal entities, the signature block should identify the quality (or legal position) of the signatory. After all, the signature block should establish how the contracting party is represented. This can be done by embedding an extra line in the signature block identifying the representing entity. Such signing particularity could also be ‘announced’ in the parties block on the first page.
Similarly, if a company must be represented by another legal entity (i.e. because the managing director is itself a legal entity), the signatory line should identify both the name of the latter legal entity and the name of the person authorised to represent that legal entity.
Each party a signature block. If a contract is entered into between more parties (e.g. a loan facility agreement between financing parties on the one hand and various affiliated borrowing (or guaranteeing) parties on the other hand, each such party should have a signatory line even where several entities are represented by one individual.
A signature schedule. If an agreement is between many contracting parties the execution of the agreement may logistically be burdensome and it can be useful to provide for a separate signature schedule. Accordingly, the concluding clause should refer to the schedule in which the signature blocks are included and the signature schedule should identify the agreement to which it relates (as well as a phrase ascertaining that execution of the schedule has the effect of executing the agreement). This has the same effect as a deed of adherence, by the execution of which a person adheres to an existing agreement.
Attach no powers of attorney or other evidence. It is uncommon to attach evidence of each party’s signatory’s authority to represent the contract party in the ordinary course of business contracts. Moreover, it seems common practice that both parties rely on the other party’s proper entering into the agreement. In major corporate transactions (in which a law firm is involved), the contract binders often contain a final chapter in which copies of all powers of attorney and corporate resolutions are gathered.
A wife or husband’s consent. Under the laws of several EU member states, statutory provisions exist requiring that the partner of a natural person who is married in a ‘community of property’ must give his or her consent to important transactions by the partner (e.g. a transfer of shares or securities in a company or granting a guarantee on behalf of a company owned by that other partner). If the consent is missing, the transaction is null and void. In practice, such consent is typically placed underneath the signature blocks (and obviously requires the signature of the partner). In the Netherlands, there is important case law confirming that this principle also applies to securities in investment funds (e.g. established in relation to life insurance policies or mortgage-related financial products).
Initialling contract pages #
In many jurisdictions, it is common practice that all pages of a contract are initialled; the question is ‘why?’ Initialling contract pages appears to be something that is not found in US commercial legal practice, whilst in Spanish and Dutch legal practice, initialling each page is common.
In the Netherlands, it is common practice to initial all pages (including a cover sheet). On the signature page, the initialling person (who is not necessarily the signatory of the contract) would place his or her initial next to the legal entity for which the document was initialled. As in Spain, this applies both to M&A and ordinary course business transactions.
Legal prerequisite? Is there a statutory requirement for this? We are not aware of such requirement. In particular contexts or for certain specific types of contracts, it may have been in the past. Apart from very specific cases, initialling pages is probably nowhere required in order for the contract to be valid or enforceable.
Purposes of initialling contract pages. In an M&A context, even the pages of the schedules and annexes (including those attached to a disclosure ‘letter’) would be initialled. For ‘Agreed Form’ agreements attached as schedules, often, a reference is made in the definition of Agreed Form that they are initialled for identification purposes (meaning that “this is substantially the text we agreed”). After closing, they would probably be replaced in the binders by their executed final form versions. Usually, the lawyers (i.e. the junior associates of the law firm’s partner involved) would do the initialling. The main idea would probably be to be able to identify the documents in their entirety; and certainly not as a representation by the law firm that the document is complete.
For ordinary course agreements, initialling the pages serves an additional purpose: in several companies, there is a compliance policy rule saying that the contract be reviewed (and approved) by in-house legal counsel. The authorised signatory (often: the two signatories) would sign only if legal counsel has initialled the pages as a sign of approval.
In both contexts, initialling serves the purpose of a final check whether the agreement is complete, properly dated and undone from square bracketed texts. Typically, it happens that annexes with technical spec sheets, the general terms and conditions or even the list prices have not yet been attached.
By way of conclusion: the initialling lawyer serves as a gatekeeper of the contracting process. Introducing initialling as a safeguard in the process improves transaction quality, increases certainty and hence reduces risks.
Although this is not a matter of contract drafting, knowing what notarisation, legalisation and apostilles entail, is very helpful. The signature block often starts by saying that the contracting party is duly represented by its signatory. There is no need to explicitly state this; if the signatory is not authorised (whether in accordance with the statutory rules or under case law) the represented party would not be bound by the contract and the signatory would be personally liable vis-à-vis the other party.
When the other party insists that a signatory’s due authorisation is formally confirmed, then in most cases a copy of the signatory’s passport (or other appropriate ID) would be acceptable. If a party requires a higher level of certainty, also an extract from the commercial register or court registry would be required. The highest level of certainty is typically sought by a notary (who needs to execute a notarial deed) or by a public official since they must exclude the chance of fraud. Instead of a ‘copy passport’ the ‘legalisation’ of the other party’s authorisation would need to be established. Such legalisation requires an apostille.
Apostille on a contract #
In short, an apostille is the French word for a certification commonly used to refer to the legalisation of a document for use in another jurisdiction. The apostille or legalisation ascertains that the signature of the legalised document is authentic. Such ‘legalised documents’ must be accepted in the countries that have signed the Hague Convention. Where the apostille-issuing country is not a party to the Hague Convention, usually an additional diplomatic or consular confirmation of authenticity is necessary.
Legalisation and notarisation of contracts #
In practice, an apostille is not much more than an extra page (attached to the legalised document) with a stamped legalisation statement (as required by the Hague Convention) and, in some jurisdictions, one or more colourful stamps (for the taxes and levies paid), signed by an official. The official is normally a consul, a court or other public official who ‘legalises’, by means of the apostille, the authenticity of the signatory of another official, typically a civil notary. The latter has actually investigated and ascertained what needs to be established in the relevant context the formalities up to the notary’s signature, are sometimes called ‘notarisation’.
What to legalise? In relation to the execution of an agreement, the legalised document should establish: (i) the names of the persons who are duly entitled to represent the relevant contracting party; and (ii) whether that representative (and not another person) has indeed signed the legalised document.
Example. For example: in many continental European jurisdictions, the transfer of shares requires a notarial deed of transfer; because of this formality, a transfer is often done on the basis of a power of attorney. In order for the power of attorney to be a valid proof of authority, the notary will ascertain that the seller is validly transferring the shares (and the same applies to the acquisition by the purchaser). Therefore, the notary needs to establish both:
- who is duly entitled to represent the seller; and
- whether that representative (and not another person) has indeed signed the relevant power of attorney.
Accordingly, the notary needs to have a statement under the law governing the internal affairs of the selling entities (i.e. that according to the articles of association, the seller can be represented in a certain manner), as well as a statement that the person who signed the power of attorney is indeed the representative (i.e. the signatory needs to go to a notary who will establish his or her identity on the basis of a valid ID and witness signature of the power of attorney).
Although the legalisation of a party’s legal acts would typically be certified by one and the same certification of a notary (and subsequently the court), it may well be that two apostilled documents are delivered depending on where the representative actually is i.e. one ascertaining how the party can be represented and one stating that the signature is actually that of such duly authorised representative.