17 January 2012 | Richard Lane

How many signatories does it take to execute a document?

The case

Redcard proposed to sell a freehold property to Williams. The agreement also contained the sale of five leasehold flats within the building, each owned by a different individual, each of whom were directors and shareholders of Redcard. Redcard and the five individuals were all named as ‘sellers’ in the contract.

When the ‘sellers’ came to execute the contract, the five individuals signed directly under the words ‘SIGNED…SELLER’, including two who were authorised signatories for Redcard.

The buyers refused to complete the purchase claiming the agreement was not executed by the company in accordance with section 44 of the Companies Act 2006 and S2 of the Law of Property (Miscellaneous Provisions) Act 1989. Section 44 says a document is validly executed by a company if it is affixed with the firm’s common seal, it is signed by two ‘authorised signatories’ or by a director in the presence of a witness. Williams argued there should be a signature specifically for Redcard stating that it was on behalf of the company.

In this second appeal the Court 
of Appeal again dismissed the 
buyer’s argument and ruled that as Redcard was defined as a “seller”
in the agreement and as the 
signatures contained two authorised signatories for it, Section 44 was satisfied and Redcard had validly executed the agreement.

What this means

One signature can amount to a simultaneous execution in different capacities, here as an individual and as a director and authorised signatory of Redcard. It also confirms when executing a document the wording ‘by or on behalf of the company’ or similar is not required, providing it is clear the company is a signatory.

Redcard was defined as being a ‘seller’. At the conclusion of the case, the judge stressed compliance with the formalities of contract execution was vital to avoid “expensive litigation”.

The multiple appeals in this case could have been avoided if the sellers had been more careful. Although wording such as ‘by or on behalf of…’ is not necessary, it is still advisable to use it to avoid potential litigation.

☛ Richard Lane, partner, commercial, Hugh James.