The issue of completing documents correctly is causing us some delay and concern. Whilst undertaking due diligence over the last month we have seen more than 50 construction related documents that have not been correctly signed by the parties. As a result they are likely to fail as a deed should parties try to place reliance on them. The documents range from building contracts, appointments, novations, collateral warranties and charges. Given this it is perhaps time for a reminder as to the formalities required to ensure a document is legally binding and enforceable.
Certain formalities must be complied with for a document to be effective as a deed, lasting for 12 years, including that the instrument must be validly executed as a deed. Signature on behalf of the company/LLP must be by either two authorised signatories or a director of the company in the presence of a witness who attests the signature (this is important). Additionally, a company/LLP can execute a document by affixing its seal to the document. Currently, the most popular error is the failure to ensure signatures are witnessed when required.
The failure to complete documents correctly and in turn cause them not to be legally binding is puzzling. Parties may prefer to complete documents as simple agreements (lasting for 6 years for the purpose of placing reliance on them) rather than as a deed (lasting for 12 years for the purpose of placing reliance on them). Of course, some parties may be comfortable with a situation that means documents, that they prefer not to complete, are not signed correctly. They may ultimately suggest the documents have not been validly completed and the other party cannot rely on them. But for others, they may be keen to ensure that they are able to rely on, and benefit from, the documents that they have carefully negotiated.