Execute or sign: which is correct?

Last month, this column looked at the terminology that is used in English and Chinese to describe contracts and agreements. This month’s column follows up with an analysis of terms that are used when parties enter into a contract or agreement.

English terminology

In English, lawyers may talk about a party to a contract “executing”, “signing” or “entering into” the contract. Is there any difference between these terms or do they all mean the same thing?

Lawyers often use these terms interchangeably. However, there are some points of difference. Although much depends on the context and the ways in which these terms are treated by case law and statute, it is possible to draw some simple distinctions.

The primary difference between “execute” and “sign” is that “execute” refers to the act by which a contract is brought into effect (i.e. the act by which a contract becomes valid and enforceable). In many cases, it will be sufficient for a party simply to “sign” the contract.

However, there may be additional requirements that need to be satisfied before the contract can come into effect. For example, it may be necessary for the contract to be witnessed. And in the case of a deed, the traditional requirement was for the document to be “signed, sealed and delivered” (see further below).

The primary difference between “enter into” and the other terms is that “enter into” is broader and can refer to both written and oral contracts. As noted last month, certain contracts are required to be in writing under the laws in both common law jurisdictions and in China.

The term “execute” is sometimes used in a broad sense to refer to the process of implementing a contract or another legal document (e.g. a will or a power of attorney) instead of referring to the act of signing a document. However, in the context of a written contract, the term is generally used to describe the situation where a contract is brought into effect by being signed in accordance with the applicable formalities.

Signed, sealed and delivered

As mentioned last month, a deed is executed in a formal manner and is often described as a “contract under seal”. This comes from the traditional requirement for a deed to be “signed, sealed and delivered”.

The first component of this phrase – namely, the act of signing – is self-explanatory. The only additional point to note is that it has traditionally been possible for individuals to sign a deed with a cross if they were unable to write or sign their names. In this respect, there are similarities with the traditional practice in China, where it was possible for individuals to sign a contract with a cross or a thumbprint.

The second component – namely, the act of “sealing” – deserves some explanation. Traditionally, it did not refer to a company seal in the modern sense of the term. Instead, it referred to the red wax seal that parties would place on a document in order to authenticate the signature. In this sense, its function was similar to the use of chops in China, where a chop was considered to be more forgery-proof than a signature.

A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com