Contract Signatures – How to do it Right

After you finalize your estimate for remodeling work requested by the husband and wife homeowners, you make an appointment to present your proposal. When you arrive with your paperwork, only one spouse is available. He agrees with your numbers and signs your construction contract. Should you start work or insist that both he and his wife sign your agreement?

You would do well to insist. Not having both signatures on a home improvement contract could be a costly oversight. Here’s an illustration.

One residential contractor, who had only obtained the signature of one spouse, filed suit against both husband and wife when he wasn’t paid all that he believed was due. Both owned the house where he performed his work. But to his surprise, this contractor discovered he could only sue both spouses if he had a lien in place.  That is the law in many jurisdictions. If only one spouse enters into a contract for improvements to real property, the contractor’s options are to either sue that one spouse under the contract or hope the applicable lien law will allow the non-contracting spouse’s interest in that property to also be encumbered. This assumes the property is owned by at least one of them, the couple is not living apart, and the contractor has a valid lien in place.

Unfortunately, the contractor in our example did not timely file his lien. So all he could do was to pursue his contract rights. The signed agreement created personal liability for the husband but not the wife. Okay you might think, that’s not so bad. Well in this case the husband was actually unemployed and deep in debt. The only real asset was his ownership interest in the house and that would not be attachable without a valid lien. Ouch.

There are any number of stories retelling homeowners’ surprise when residential contractors wouldn’t even make an appointment for an estimate without a commitment that both spouses would be present.  This is clearly an extreme position, running the risk of actually offending the customer –the wife for one could easily perceive the contractor as being sexist. Better to request that both spouses be available at the time of contract signing by explaining that this is company policy so as to properly protect the contractor’s future lien rights, if ever needed.

And what about those signatures, do they have to be originals for you to be able to enforce your contract? Not these days when electronic signatures are recognized in most all jurisdictions as originals. The number of worldwide e-signature transactions jumped ten fold since 2012 to over 800 million. The benefits are obvious. You no longer have to wait on folks to sign off on your proposals and return an original for your files.

That said, obtaining electronic signatures is generally best accomplished through a third party service such as DocuSign or RightSignature. Such an approach minimizes the opportunity for fraud, can store completed documents in the cloud, and allow the quick and easy transmission of a signed contract to the intended recipient.

Pricing a job correctly is an important first step for any contractor. Finalizing the contract properly with the right number and type of signatures will seal the deal.

I don’t have an original signature on my contract, should I be worried?

The average person believes that if a signature or document isn’t in its original form then somehow, it is going to be challenged in court, or the signing party can argue that it is not authorized or it is a forgery. All of that is possible, but having litigated hundreds if not thousands of cases in our Miami construction law firm over the last twenty-five years, we can tell you that it is astonishingly rare we receive claims from a signing party that the document is not an original, or that the signature is not an original. Most times, all we present as evidence in court is a photocopy of the actual document, and it is very rarely challenged.

What can you do to protect yourself if you don’t have an original?

Try to obtain correspondence surrounding the transmission of the document to show that the person that provided it to you knew that it was coming from or going to their office. Let me give you a practical example of what I mean.

Some months ago, we had a case involving one of our clients, a subcontractor. The contractor claimed that the change orders that were part of our claim were not authorized, even though they were signed by the contractor’s project manager. Not only did we have the executed change order with a signature (we presented a copy because everything was electronic), but we also attached email correspondence surrounding the change orders that went to most of the contractor staff, including the contractor’s president. And in addition, of the same people including the president of the construction company were copied with the signed change order we received from the contractor. Importantly we were also able to show, no one argued or complained at the time about the document.  So, when we were able to present all of these pieces of evidence that the change was not only authorized, but that they knew about it, their arguments melted away.

So, the first thing to do to protect yourself is to make sure that you obtain correspondence to and from the people that authorized the transaction, whether it’s a change order, a release, a waiver, whatever document that it may be, showing that the people who need to receive the document are shown on the email chain, and they receive copies and related correspondence.

The second thing you can do to protect yourself is to see if your contract requires only certain people execute the particular document. For example, many construction contracts state that only the project executives have the authority to order new work or sign change orders. If you have a contract that says that you need to make sure you have those people execute the document. Know that if the authorized person doesn’t sign the document, you may run a risk later that the document will not be considered to be properly authorized.

Is the Signed Agreement Valid?

You think you have an understanding. So you prepare and sign an agreement with all the key points, and send it to the other side for signature. You even add a provision, asking that the document be signed and returned by a particular date. What if it isn’t; do you still have a deal? Someone, whose agreement contained the following provision, recently asked the court the same question:

The parties had proceeded as if a deal was in place even though no signed agreement was returned by the stated deadline. Two months later though, when a dispute arose, one of the parties asserted for the first time that there was no agreement. He argued that he hadn’t ever received back a signed copy by the July due date. He demanded the return of the deposit he had paid. When he didn’t get that back, he filed a lawsuit.

How many signatures do you need?

You might think this would be an open and shut case. The agreement wasn’t received back in time so what was there to argue about? However, the court determined that while the agreement may not have been delivered back timely, it had been accepted. Yes, it had been sent after the deadline, but no objection was raised either at the time of receipt or any time thereafter. The facts actually revealed that the parties had gone about incorporating changes to the agreement, even creating an addendum which was signed sometime later by each of them, all after the noted deadline.

Simply having a drop dead date in an agreement, even one stating there would be no deal if a signed copy is not received or signed by a particular date, isn’t going to be effective if the parties subsequently waive that requirement by their actions. In most instances, the law looks at what the parties have actually done not just what they wrote.

No Deal, Not Until Everyone Signs

Florida courts have consistently held that a settlement agreement resulting from a mediation will not be enforced without the signatures of both the attorney and the client. The fact that an attorney may have signed on behalf of his client or in the presence of his client is not sufficient to overcome the legal requirement that such an agreement also have the client’s signature.

A recent appellate decision upholding this long established position grew out of a case brought by a lawyer who sued for unpaid legal fees. The amount in dispute was some $25,000. While the parties (the former lawyer seeking his fees, the client who owed the fees, and the client’s new attorney) had attended a mediation, they couldn’t reach an agreement after three hours of settlement discussions.

Mediated Settlement Agreement: is it Valid?

They did, however, agree to continue seeking a resolution. Some time later, the former lawyer filed a Motion for Final Judgment, attaching what he referred to as a Mediated Settlement Agreement, calling for monthly payments over a period of time, with the usual provision that if the client didn’t make the promised payments, the lawyer could obtain a final judgment. Apparently, the client’s new attorney and the former lawyer had signed this agreement but the client had not. The representation to the court was that the client had orally agreed to the terms of the Mediated Settlement Agreement, and the court granted the Motion for Final Judgment.

The client subsequently denied that he had ever agreed to anything and he turned around and immediately appealed the court’s ratification and entry of this agreement. The client argued that the court incorrectly relied on a settlement agreement he hadn’t signed. Florida Rules of Civil Procedure along with a long line of cases supported the client. They state that any settlement agreement resulting from a successful mediation must be in writing and signed by both the parties and their counsel. Indeed, courts have even held that an attorney’s signature in the presence of a client is not enough to bind a client to the terms of a mediated settlement.