LEGALLY SPEAKING

Be aware of formalities when executing documents

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Knowing and following the legal formalities for executing a written agreement are vitally important as failure to do so could render an agreement unenforceable or void.

Valid execution can be governed by many factors, including the type of document being executed, whether it is being executed by an individual or on behalf of a company, the governing law of the document and the place of execution.

Most agreements are executed as simple contracts unless special requirements or procedures are specifically required by the agreement itself, by statute or, in the case of a company, by its bye-laws. Generally, execution of a simple contract only requires the signature of the person signing except in certain instances where the contract is expressed on its face to be a deed, or is to be executed as a deed.

Where a document is being executed on behalf of a company, you must ensure that the company has the necessary corporate power, capacity and authority to execute the document. This requires reviewing the company’s memorandum of association and bye-laws to ensure that the company is empowered to enter into the document and to ensure that appropriate authority has been given to those persons signing the document on the company’s behalf. The company’s bye-laws should always be consulted to ensure that any special execution requirements are complied with.

Some documents are expressed to be or required to be, such as mortgages over land executed as deeds and generally require a greater degree of formality.

A document executed as a deed has two main benefits. First, there is no need for consideration, a legal concept requiring both parties to exchange value under a contract. Second, the limitation period for bringing an action under a deed is longer than that for a simple contract.

Deeds executed by companies can be executed under seal, although, in general, this is not required. In 2006, the Companies Act 1981 was amended so that a deed can be executed by way of seal, or by the signature of authorised persons. Most Bermuda companies still have a seal and whether or not a seal is affixed to a deed should not affect the legality of the document (i.e. a deed that is not executed under seal is still binding upon the company) provided the company executes the deed in accordance with its bye-laws.

Deeds executed by an individual in their personal capacity (and not on behalf of a company) should be either expressed on their face to be executed as a deed, expressed to be “Signed, Sealed and Delivered” by the individual or have a personal seal affixed to the deed. A personal seal can be affixed either by placing a small red wafer seal beside the person’s signature or, if a wafer seal is not available, by drawing a small circle next to the signature and writing the initials L.S. (the abbreviation for the Latin term “locus sigilli” meaning the place where the seal is affixed) in the centre.

A person appointed under a power of attorney may also execute documents. If the attorney is authorised to execute a document as a deed then the power of attorney itself should be executed as a deed in the manner described above. Any person may appoint another to be his attorney, but a person’s spouse may not witness a power of attorney that is to be exercised during legal incapacity. If the attorney is executing a document on behalf of a company, then bye-laws must be checked to ensure that the company can delegate via a power of attorney and to determine any execution requirements.

Some documents must be signed before a Commissioner for Oaths (“Commissioner”) who is appointed by the Chief Justice to administer or take oaths. Signing before a Commissioner is required, for example, when:

l swearing an affidavit, which requires placing one’s hand on a bible and swearing that the name, handwriting and contents of the affidavit are true

l making a legal declaration e.g. declaring the contents of documents to be true

l affirming the name, handwriting and contents of an affidavit are true in cases involving a person who is not religious

Stamp duty is not payable on documents signed before a Commissioner where they are to be used in court proceedings. However, it may be payable on other documents, such as legal declarations made on certain government application forms, that are required to be signed before a Commissioner. Generally, Bermuda exempted companies do not have to pay stamp duty on instruments they execute in accordance with the Stamp Duty (International Business Relief) Act 1990 unless the instrument is effecting a disposition, or is an agreement for the disposition of Bermuda property.

In some cases, particularly where a document is to be sent overseas, documents may be required to be signed before a Notary Public (“Notary”). A Notary is a person enrolled as such by the Supreme Court mainly for the purpose of certifying, attesting or authenticating documents. Notarisation requires the person to appear in front of the Notary, who then certifies that the document has been executed before him. In a few instances, documents are required to be apostilled for use overseas, which requires sending the Notary’s certification to the Governor’s office, which will certify the Notary’s signature.

Special provisions may apply for the execution of documents by those persons who are vision or hearing impaired.

Attorney Joelina Redden is a Senior Associate in the Insurance Team within the Corporate/Commercial Practice Group at Appleby. A copy of this column can be obtained on the Appleby website at www.applebyglobal.com.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.

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Published Apr 18, 2011 at 9:00 am (Updated Apr 18, 2011 at 9:31 am)

LEGALLY SPEAKING

Be aware of formalities when executing documents

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