After weeks of negotiating with the other side, you’ve reached an agreement in principle. You’ve gone through several drafts of the contract and even incurred legal fees for an attorney review. So why is that contract now a worthless piece of paper? Because it was never properly executed.
Not only does your document need to be signed by all the parties, it needs to be executed properly. Proper execution means at a minimum doing all of the following:
Identify the contracting parties correctly. While this seemingly obvious suggestion might make you roll your eyes and say “Duh!”, there’s a surprising number of contracts that get this information wrong. Hence, if you’ve organized a company so you can have limited liability for your business activities, make sure the company – and not you – is the contracting party. If you or the other side is a company with subsidiaries and affiliates, make sure the contract names the correct subsidiary.
Insist on legibility. At some future point, you might need to prove the contract is valid and you’ll want to be able to identify the person on the other side who signed. Some people have signatures that are completely illegible. I’ve seen signatures that are nothing but a loop followed by a wavy line. If your counterpart has that genre of signature, it is even more imperative that she also print her name beneath the signature and provide a title if signing on behalf of a business entity.
Don’t forget the initials. Indicate whether the contracting party is a corporation, general partnership, limited liability company, or a solo proprietorship doing business under an assumed name. Do this by using the full legal name of the contracting party which may include an “Inc.”, “LLC”, or “DBA”.