During the rush of a transaction, documents may need to be signed in counterpart.
Signing in counterpart means that duplicate contracts or deeds are printed so that there is a separate copy for signing by each party. The opposite situation is where one copy of the contract or deed is printed and signed by all parties to it. If you have numerous parties all in different locations it is a useful tool to allow completion without having to circulate a single copy of a document to all parties to sign. Often, you will see a clause in the agreement permitting the signatories to sign it in counterpart.
If the contract or deed does not contain a “counterparts clause”, can the parties still execute the contract or deed in counterpart?
Generally, yes, but best practice is to have a specific clause.
In short, contracts and deeds can usually be signed in counterpart. The absence of a specific counterpart clause should not affect the validity of a deed where a deed has been executed in counterpart. However, having such a clause can help to prevent another party from claiming that an agreement is not binding. They could claim that they did not know, due to the lack of a counterpart clause, that they were entering into a binding contract by signing an agreement not signed by the other parties.
Therefore, best practice is to either:
- have the contract or deed signed by all the relevant parties on one document; or
- have the contract or deed signed in counterpart but ensure that a counterparts clause is expressly contained in the contract or deed.
Counterpart clauses are so common they are rarely negotiated.
Can two directors sign in counterpart when both directors’ signatures are required?
There is currently no English law evidence or specific authority on whether each authorised signatory can sign counterparts of the same document. However, there is guidance that endorses the view that an execution clause requiring signature by two authorised signatories could be signed in counterpart. In particular, this approach appears to be recognised in the note on electronic execution published by the joint working party of The Law Society and The City of London Law Society which was confirmed in the Law Society's subsequent Q&As on how to use electronic signatures and complete virtual executions.
However, owing to the lack of actual legal authority, if it is possible for the two signatories to sign the same counterpart, it remains the preferred approach for many. If the two directors cannot be in the same location, consider having the document executed by one director in the presence of a witness instead.
Alternatively, the directors need not sign at the same time. If there is time, the same counterpart could be sent from one to the other for signing, before delivery or they could also each sign electronically – eg director one inserts their e-signature into the document, then forwards that document to director two, who adds their e-signature into the same document.