Some contracts must be in writing in order to be enforceable against the parties to that agreement. Even where no such requirement exists, however, a formal written agreement between two people that is signed by all the parties helps ensure that if a dispute arises and cannot be resolved informally, the parties can prove the existence and terms of that agreement in court. A document may be valid with a single signature, even where some terms have been omitted.
However, simply signing your name on a napkin may not be sufficient to prove your case. The necessity of technical legalities associated with signing a contract have changed since the days of parchment, quill and ink.
Know Which Agreements Must Be in Writing
In most jurisdictions, a legal principal known as the Statute of Frauds requires certain agreements to be reduced to writing in order to be enforceable. For example, the Uniform Commercial Code, Section 2-201 requires any agreement for the sale of goods worth $500 or more to be memorialized in a written contract signed by the party against whom the contract is to be enforced. The UCC has been adopted by all 50 states in the U.S. but applies only to commercial contracts – contracts between businesses or individuals doing business, not between businesses and individuals who are acting as consumers.
Additionally, most states have adopted the Statute of Frauds, which applies to other types of agreements. Common types of contracts that must be in writing include contracts for the sale of land, contracts which cannot by their terms be performed in less than one year, and contracts in which an estate's executor promises to pay a creditor of the estate out of the executor's own funds.
Confirm the Signer's Authority and Competence
Before a party signs a contract, it's essential to confirm that the other person signing the agreement has the authority to do so. If he signs the agreement on behalf of a corporation or other entity but he doesn’t have proper authority to bind the company, the agreement may be unenforceable against the company or the individual signer.
By the same token, a person who has not yet reached the age of majority generally lacks the legal capacity to enter into any contract. The other party can ratify a contract entered into while still a minor within a certain period of time after reaching the age of majority – 18 in most jurisdictions – or he can reject the contract, leaving the other party with diminished recourses to recoup his losses.
Sign the Agreement
The signatures on a contract should be acknowledged either by two witnesses or by a notary public. Notarization and witnessing are methods by which the parties who are relying on the document can verify its credibility. Some states don't require witnesses for an agreement to be legally enforceable, but an agreement claimed by someone to bear a forged signature would be highly contestable in court if it's not witnessed or notarized.
Some documents, such as deeds, may require notarization with specific language to be acceptable to title companies, attorneys or other parties relying on the documents. For such documents, it's highly advisable to retain the services of an attorney experienced in that kind of transaction. The attorney can make sure your signed agreement is enforceable and properly executed.
Record the Agreement
If the agreement concerns the purchase or sale of real estate, it must be recorded or filed with the real property records of the county or jurisdiction where the property is located. This is particularly important if payments are to be made over an extended period of time, and no actual deed will change hands until the price is paid in full.
If a seller signs a written agreement to sell a parcel of land, and the agreement remains unrecorded, he might deed the property to another party in the meantime. If the state is a “race-to-the-courthouse” state, the purchaser named on the deed will have acquired the property. In such a case, the first buyer could lose his rights to enforce the contract and take possession of the property.