Initialling contract pages

Strange behaviour: initialling pages

Under the heading cultural differences, I address a topic that one of my bosses in a previous life as attorney (advocaat) claimed was typical Dutch. In my subsequent professional engagements at multinational listed companies, I discovered that it is a typical European thing: initialling pages.

Why do we do this, Ken Adams wondered in his blog. I responded but will address the topic here as well.

In many jurisdictions, all pages of a contract are initialled; the question is ‘why?’. It is also Ken Adam’s understanding of the legal practice of having signatories also initial each page of the contract, would be mainly a non-US practice:

  • “It’s commonplace in wills, apparently as a check against substitution of pages.
  • It’s required by statute in the case of some contracts. For example, under Ohio Revised Code 1349.55, each page of a contract providing for a non-recourse civil litigation advance must be initialed by the consumer.
  • With respect to business contracts, in the U.S. it would be unusual for the parties to initial each page, except in the case of real-estate contracts.
  • In Europe, it’s commonplace for the parties to a business contract to initial each page.”

A Spanish lawyer responded to Ken that in Spain it is customary to initial all pages, both for ordinary course business agreements and M&A agreements. This is consistent with my observation, where I believe that in many more European countries (and a fortiori maybe outside Europe) pages would be initialled.

Legal prerequisite? Is there a statutory requirement for this? I don’t believe so. It may have been like that in the past because initialling pages is something with a long history (I have seen initialled contracts with German, Italian and French companies that were entered into already in the sixties or earlier). Apart from the above Ohio example, initialling pages is probably nowhere required in order for the contract to become valid or enforceable.
In a recent blog I addressed execution and delivery aspects for English-law-governed deeds: for a deed to be valid and enforceable, in addition to some cerebral wording (i.e., that it is a ‘deed’), it needs to be signed according to some formalities (with at least to signatories). Another familiar example is the notarial deed or certification, which documents also trigger specific signing (-ceremony) requirements. But these are the only example I know of particular formalities related to signing a specific type of ‘contract’ and they would not include initialling pages as a prerequisite.

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 inital next to the party for whom the document was initialled. As in Spain, this applies both to M&A and ordinary course business transactions.
M&A. 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.
Business contracts. 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.

This is where the initialling lawyer comes in: as a gatekeeper of the contracting process. Introducing this safeguard in the process improves transaction quality, increases certainty and hence reduces risks. I doubt that a claim for negligence would succeed, but I am sure that persons who have a risk-avoiding character will take an additional look at what happens. Since risk-avoidance is partly perceived as a culturally determined parameter, the practice of initialling pages may well be culturally determined. Any feedback?

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