What makes a signed document legal?
While the ins and outs of contract law can be tricky, the rules around document legality are fairly straightforward.
That’s important because misunderstanding the legalities of a contract or binding agreement can lead to unenforceable documentation that holds no legal weight.
In this document, we’ll cover (briefly) what can make a signed document a legally binding contract and what you should watch out for when you sign.
Let’s get started!
Quick disclaimer: This article speaks in broad terms and isn’t intended as legal advice. The laws in your region may vary. Always consult a law firm in your jurisdiction if you have questions about a written contract or verbal agreement.
What makes a document legally binding?
While it’s easy to think of formal contracts as long, boring documents packed with dense legalese, that isn’t always the case.
A contract can be as complex as the terms of service agreement or as simple as a few paragraphs written on a sheet of paper.
Under the right circumstances, almost any document can turn into a binding and enforceable contract.
Here’s a quick rundown of what makes a document legally binding:
1. The document contains an offer
One party must offer something of value, such as goods or services, to the other party.
The intent to make an offer needs to be clear and the offer needs to be stated in specific terms.
The offeror also needs to be clearly identifiable.
2. The offer is accepted
The second party in this exchange must accept or reject the initial offer. The two parties can negotiate or counteroffer until they reach an agreement.
Once an agreement is reached and both parties agree to the terms, the offer is accepted.
3. The agreement offers consideration
Contracts aren’t one-sided affairs. Something of value must be exchanged to make a contract enforceable. This is called consideration.
The most common form of consideration is money, but you could also exchange services, stocks, real estate, or other items of value to fulfill this obligation.
A properly signed contract represents a consensual agreement that both sides feel is mutually acceptable and beneficial.
It provides the necessary details surrounding that meeting of the minds, including everything you need to know in order to fulfill the terms of the agreement.
Regardless of the type of contract involved, all three elements of a contract must be present for a contract to be considered enforceable and legally binding.
When a contract contains those essential terms and elements (subject to federal regulation and state laws), it has the legal capacity to hold its own weight in a court of law.
Signatures and enforceability
The final element you’ll need to create a legal contract is proof that the contract was accepted.
This is most often accomplished by having both parties sign the contract — either electronically or via a handwritten signature.
However, a signature isn’t always required to make a contract legally enforceable.
Verbal agreements can be considered legally binding, though they can be difficult to prove.
If one party stops operating by the terms of the contract and the other side can prove that both parties initially agreed to those terms, the contract may be deemed legitimate.
Having written agreements and contracts for your business transactions and partnerships will go a long way toward overcoming any breach of contract or similar legal issues you might encounter.
For most individuals, startups, and small businesses, electronic signatures are one of the fastest and easiest ways to handle this.
Why eSigning tools are the best choice
Electronic signature platforms like PandaDoc allow both senders and recipients to ensure the validity of documents without driving up costs.
These software tools are more secure than basic electronic signatures that are uploaded to PDFs or text documents.
In particular, PandaDoc leverages the following security features:
- Time-stamped signatures that include identifying elements of the signee, such as date/time of signature and IP address.
- Legal compliance with all major electronic signature legislation in the US, Europe, and elsewhere.
- Secure storage of all documents and signatures captured while using the platform.
- Trackable workflows and processes for paperless documents.
- Native integrations to add signatures directly to a variety of document types including PDFs, Google Docs, and Microsoft Word documents.
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Frequently asked questions
What makes a document invalid or not legally binding?
In general, legal documents have varying levels of unenforceability.
Some documents may be considered completely invalid if the basic elements of a contract (offer, acceptance, consideration) aren’t followed.
At the same time, if it’s not possible to prove that both parties signed a contract or have been operating under the guidelines set forth by a contract, then a contract may be deemed invalid.
However, if the contracts were signed in good faith and all the basic elements of a contract are present, then it’s possible that a contract will only be deemed invalid in a limited scope and that portions of the contract will be considered valid when others are not.
What is the difference between a contract and an agreement?
From a legal standpoint, these two terms are used interchangeably, but they are governed by a different set of guidelines.
Agreements are often more information and may not be legally enforceable. However, they can be written in such a way that they are contacts in all but names.
For example, an employment agreement is likely an employment contract despite the name. Equally, a warranty agreement can carry legal weight due to the state and federal regulations surrounding warranties.
What are the consequences of not having a legally binding document?
Depending on the relationship between both parties, consequences could range from minimal to catastrophic.
If both parties operate within the agreed-upon terms and never encounter an issue, then the consequences are likely to have a minimal impact.
Unfortunately, contracts exist as a guideline for situations where things don’t go as planned. In those scenarios, the consequences can be catastrophic, leading to multi-million dollar lawsuits and sour business relationships.
From a business perspective, having a clearly defined contract can save time, money, and headaches in the event of a dispute farther down the road.
What rules govern electronic signatures?
A number of important pieces of legislation. These are:
- Uniform Electronic Transactions Act
- Electronic Signatures in Global and National Commerce Act
- FDA Electronic Signature Regulations
- eIDAS Regulation
- United Kingdom Department for Business, Energy & Industrial Strategy on Electronic Signatures and Trust Services
- General Data Protection Regulation (GDPR)
You can also check out our e-signature legalities page for additional information on electronic signatures in other countries.
Does using a notary make documents legally binding?
While a notary won’t help with the specific terms of the contract, the notary can verify the identities of the signees and bear witness to the signing.
Notarization is not essential for a document to be legally binding, but it does make it easier to verify valid contracts if later issues should arise.
For individuals, startups, or small businesses without in-house counsel or legal services on retainer, notarizing printed documents can be useful.
However, electronic signatures are a faster and easier way to get documents signed.
Better contracting with PandaDoc
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Our e-signature platform is equipped with a variety of tools to help you create stunning business proposals, contracts, and more.
Work from premade templates or build your own document completely from scratch — it’s all possible with PandaDoc.
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