The due execution of documents is important to create legally binding agreements. This is particularly so for the execution of a deed, which has strict requirements to ensure that it is valid and enforceable. On the other hand, a defect in the execution of a contract may not be fatal to the enforceability of the contract. However, when a document is to be registered at Landgate, the execution must strictly comply with certain requirements otherwise the document will not be accepted.
This article provides a summary of the requirements for execution of documents by:
The article also discusses the consequences of a failure to comply with these requirements for due execution.
Execution of documents by a company
Section 127 of the Corporations Act 2001 (Cth) (Act) sets out the ways in which any document, including a written contract, deed, transfer of land or other property, may be executed by a company.
Under s 127 of the Act, a company may:
If a company has a seal it is not obliged to use it for the execution of documents.
Execution with a common seal: s 127(1) of the Act
A company may execute a document by fixing its common seal to the document, where the fixing of the seal is witnessed by:
Execution without a common Seal: s 127(2) of the Act
A company may execute a document without using a common seal if the document is signed by:
When executing documents on behalf of a company, one person cannot sign the document, or attest the fixing of the common seal in two different capacities (ie as director and as company secretary), unless that person is the sole director and also the sole secretary of the company.
Execution in accordance with a company's constitution
Alternatively, the company may execute documents in accordance with the provisions in the company’s constitution, which may vary the mode of execution on behalf of the company from the requirements under s 127 of the Act.
When lodging a document signed in accordance with a company’s constitution at Landgate, it must be accompanied by a true or authentic copy of the company’s constitution, to verify the right of that person to execute a document on behalf of the company.
Assumptions that people dealing with companies are entitled to make
Section 129 of the Act provides that all people dealing with a company may assume that:
For the purposes of making the assumptions as to execution by a company, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole secretary of the company occupies both offices.
If an execution clause incorrectly states that the document is being signed by two directors or by a director and a company secretary, yet the company is comprised of only a sole director/sole secretary who signs the document, then there is a risk that the presumptions may not be relied upon. The document will not, on its face, appear to have been duly executed in accordance with the requirements of s 127 of the Act, unless it expressly states that it is signed by the sole director/sole secretary. If a sole director/sole secretary is faced with an incorrect execution clause such as this, the execution clause should be amended to reflect the fact that he or she is signing as sole director/sole secretary, otherwise there is a possibility that the document may be unenforceable.
Execution of documents by an attorney
A document may be executed by an attorney on behalf of a company or a natural person, provided that that it is clear that the attorney is signing as attorney. The execution of a document by an attorney must be attested by one witness.
If the document being executed by an attorney is to be registered at Landgate, the document will not be accepted for registration unless the power of attorney under which the attorney acts has already been registered at Landgate.
Execution of documents by a natural person
Documents signed by a natural person must be attested by one witness. The execution will be duly attested where:
In the case of documents to be registered at Landgate, the witness must also include his or her full name, address and occupation. This is useful to locate the witness in the future, if the validity of the execution is called into question.
A witness must separately attest the signature of each natural person who signs the document.
Some documents, such as statutory declarations, must be attested by an authorised witness. A list of authorised witnesses is generally attached to the document being executed, and includes, for example, university academics, chartered accountants and registered health practitioners.
Modes of executing a document
A document is generally executed in the presence of all parties to the document and any witnesses, as applicable. Each copy of a document is usually executed by all parties. However, where the parties are not within reasonable proximity to each other, a contract may provide for execution in counterparts. Execution in counterparts involves several copies of the contract being made, each copy being signed by a some, but not all, parties. The execution will be complete upon the receipt of all copies of the contract, each being duly executed by the relevant parties.
The parties may also agree to execute a document by fax or email. The requirements of such execution are generally set out in the contract, however, will usually involve a final version of the document being sent to all parties, who each sign the same document. The document will be fully executed upon receipt of the original document which has been duly executed by all parties.
Importantly, the execution of a document in counterparts or by fax or email does not obviate any requirements for separately witnessing the signature of each party to the document, as the case may be.
Defects in the execution of documents
The ramifications of defective execution will depend on the nature of the document in question, in particular, whether the document is a deed or a contract.
Defective execution of a contract
A contract that has a defect in execution may still be enforceable as there is a rebuttable presumption in commercial agreements that the parties intend to create legally binding relations.
Evidence that the parties have signed the contract, despite a failure to comply with the formalities of s 127 of the Act or the general law, will be sufficient to establish that the parties had an intention to be legally bound by the agreement.
Defective execution of a deed
If, on the other hand, the document is a deed, the defective execution may have the consequence that the deed is not enforceable. The full and proper execution of a deed is critical, as compared to a contract, as a deed is a promise that is not supported by consideration. As such, the intention of the parties to be bound by the deed cannot be inferred, as it can if the document were a contract.
Failure to affix the common seal
Where a document is expressed to be executed under the common seal of the company, yet the seal is not affixed to the document, the document will still be valid, so long as the requirements for signing under s 127 have been satisfied. Thus, a failure to affix the common seal to a company document may not affect the validity of the document.
For example, in Hewlett-Packard Australia Pty Ltd v Exceed Pty Ltd [2004] FCA 135 the document was expressed to be a deed executed by the common seal of the company. The court held that the document was duly executed, despite the fact that the company’s common seal had not been affixed, as it had been signed in accordance with s 127 of the Act.
Defective execution under s 127 of the Act
Failure by the company to comply with every ingredient of s 127 of the Act has the consequence that there is no due execution of the document under s 127. There is no available curative provision provided in the Act.
The document may, nevertheless, be duly executed if it complies with the requirements for valid execution laid down in some other law or in the company's constitution.
In those circumstances, the document may still be enforceable if the court is able to find that the parties intended to create legally binding relations.
Registration at Landgate
Additional considerations also apply when the document is to be registered at Landgate. Landgate will not accept or register a document that has a defect in execution. The lodging party will be served with a requisition notice requiring the defect to be rectified within a specified time limit. For all land transaction documents, the defect must be rectified within 14 days from the issue of the requisition notice. For a caveat that needs to be supported by a statutory declaration, the requisition notice must be satisfied within seven days. If the requisition notice is not complied with within the time limit specified, Landgate may reject the document.
A fee is payable upon the issue of a requisition notice, and considerable inconvenience is caused, as the defective document must be uplifted from Landgate and re-executed. Furthermore, if the document is a transfer of land, the defective execution may have far reaching consequences, as other interests in respect of the land may be registered on the title, giving them an unintended priority position if the defect cannot be cured within the time limits allowed by Landgate.
Where bank finance is being provided, the bank (through its solicitors) will carefully check documents to ensure they are properly executed. If the bank finds the documents have not been properly executed, the rectification process can delay the financing.
Conclusion
It is essential for documents, in particular deeds and documents that are registered at Landgate, to be executed in accordance with the formal requirements provided under s 127 of the Act or at general law. Failure to properly execute a document can, at worst, mean the document is not enforceable. At best, it may still be enforceable, but there could be delays, such as in the registration of the documents at Landgate, or in enforcement. A little bit of care and attention can avoid any anguish, delay and costs at a later date.
For more information, please contact:
| Peter Beekink |
| Partner |
| (08) 9288 6751 |
| peter.beekink@lavanlegal.com.au |
