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What is a Signatory? The Basics of Signing Contracts
Electronic Signatures

What is a Signatory? The Basics of Signing Contracts

Will Cannon

Last updated on February 16, 2024

When entering into a contract, it’s important to understand the role of each party involved. One key term you’ll likely encounter is “signatory.” This article will explore what a signatory is and explain the duties and responsibilities of those who sign contracts. Understanding these concepts will make you better positioned to enter into agreements confidently.

What is a Signatory?

A signatory is a term used to describe a party who has signed a legal agreement, which requires them to take responsibility for its contents or undertake a particular action. The term can be applied to any legal entity, whether an individual or an organization. According to the dictionary, the word’s origin stems from the Latin “signātōrius,” or “signare,” which means “to sign.” The first recorded use of the term as defined today was in the early 18th century. In modern usage, the word is most often used to describe parties who have signed an agreement.

The word “co-signatory” is used when two or more parties have signed a contractual document. The act of signing makes the person a party to the document and legally obligates them to its terms. Co-signatories are typically used in business contracts and loan agreements. When two or more people sign a document as co-signatories, they are jointly liable for the obligations outlined in the document, including debts. 

Why is a Signatory Important?

Signing a document is more than just a formality; it indicates that the signatory agrees to the terms and conditions set forth in the document. By signing such a document, the signatory creates a binding contract that can be enforceable in court. This means that the signatory is legally obligated to uphold their end of the agreement.

Digital contracting has become increasingly popular in recent years; it allows deals to be closed more quickly and easily. However, like their traditional counterparts, digital contracts are only as good as the signatories and other entities who create and enforce them. For a digital contract to be legally binding, it must be signed by a party with authority to do so. This means that signatories play a critical role in digital contracting. Without them, businesses would be unable to take advantage of this important tool. As such, companies must take the time to select signatory parties who are reliable and trustworthy carefully. 

What is an Authorized Signatory?

An authorized signatory has been granted signatory powers to sign binding documents on behalf of another person or company. Generally, a standard signatory is any individual authorized to sign documents in place of another party. On the other hand, an authorized signatory is an individual specifically authorized by law or regulation to sign certain documents. For example, banks often designate certain employees as authorized signatories to sign checks or other financial documents.

Authorized signatories can also be used in personal matters, such as when someone cannot sign a document themselves due to illness or disability. The most common type of authorized signatory is a power of attorney, which gives an individual the authority to act in the best interest of another human being. Other examples of authorized signatories include executors and trustees. 

Types of Authorized Signatories

Authorized signatories come in many forms. A few of the most common types include: 

Company Directors

A signatory is an individual who has been legally authorized to represent a company. This authorization of signatory powers is typically granted to officers and directors, who are often given signatory rights by default. The director signatory is typically someone in a position of authority within the company, such as a CEO or CFO. Signatories can execute contracts and documents on behalf of the company and open and maintain bank accounts. In addition, signatories may be responsible for authorizing loans, issuing stock, and managing other financial matters.

Company Employee Signatory

In addition to directors, employees can be given signatory authority. An employee signatory is authorized to sign documents on behalf of their employer, including contracts, financial records, and other legal agreements. This arrangement allows the company to enter into legally binding agreements without having to go through the hassle of getting everyone’s signature. It also protects the company if something goes wrong with the agreement, as not every employee might have the right authority to bind the company to the contract. 

Bank Account Signatory

A bank account signatory is an individual who is authorized to act on behalf of the account holder. This authority can be granted by the account holder or by the bank itself. In most cases, bank account signatories are used to facilitate transactions and manage accounts on behalf of the account holder. For example, a business owner may appoint a signatory to handle payroll deposits and withdrawals on their behalf. Bank account signatories usually have limited authority and can only perform certain actions, such as making deposits and withdrawals or transferring funds. However, they may also be granted additional powers, such as closing the account or changing the account holder’s personal information. 

Who Can Be a Signatory?

A signatory is an individual or organization that has signed a document. In business, signatories often must agree to contracts, leases, and other legally binding documents. The term can also be used in other contexts, such as when a person signs a petition or charter. Based on the context in which a contractual transaction is occurring, a signatory is a title that can be held by many parties. 

To be a signatory, an individual must be deemed legally capable of signing binding contracts. This generally includes individuals over the age of majority and of sound mind. Minors and individuals who have been declared mentally incompetent are typically not considered legally capable of signing contracts and, as such, cannot be signatories. In some cases, businesses may also be signatories. 

How to Designate Signatory Powers

When choosing a signatory for your documents, it is important to consider the circumstances under which the signature will be made. If the document is signed in person, then you may want to choose a signatory located nearby. Many businesses increasingly rely on electronic signatures because signatories cannot always meet in person. This helps companies complete transactions faster and more securely. When scaling your contract volume, it’s important to have a thorough and easy-to-use signature request process to help your signatories sign digital contracts efficiently.  

Signaturely makes it easy to create a digital signature for you and your signatories. First, you can create a Signaturely account. Once you’ve signed up, you’ll type, draw, or upload a digital signature, which is saved for future contract signing. The platform seamlessly guides you and your signatories through signing contracts and PDFs. Signaturely also lets your team collaborate on documents so that you can track their status in real time. 

FAQs About Signatories

Here are some top questions and answers about signatories.

What is the difference between a signature and a signatory?

A signature is a handwritten or electronic mark that indicates the agreement of the person signing a document, such as a PDF. On the other hand, a signatory is a person or party who has signed a document and uses their signature to enter into a binding agreement.

What is an example of a signatory?

A company president may be a signatory on behalf of the company, meaning they have the authority to enter the company into contracts and other agreements. Sometimes, a signatory may also be someone who witnessed another person signing a document; for instance, a notary public may act as a signatory on a deed or will. 

What is a business signatory?

A business signatory is an authorized company representative who can sign contracts, agreements, and any other legal document on behalf of the business. In most cases, the signatory will be a senior member of the company, such as the CEO or President. 

How do I make someone an authorized signatory?

To make someone an authorized signatory, you’ll have to sign a form that defines the scope of their authorization. For banking purposes, you will need to obtain a signature from the individual. This can be done by having them sign a piece of paper or a digital document. Next, you will need to send the bank a form authorizing the individual to sign on your behalf. This form will require your name, account number, and the individual’s name and signature. 

What You Need to Remember About Signatories

As stated above, a signatory is an individual or company that agrees to the terms of a contract. Signing contracts is an integral part of doing business, and it’s critical to have individuals designated as signatories who are authorized to commit to the terms of the agreement. Understanding what a signatory is and how to optimize your electronic signature process can ensure that your most vital contractual agreements are executed smoothly.

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