Signing a contract under s 127(1) of the Corporations Act
Signing under s 127(1) of the Corporations Act 2001 (Cth) is a common way for companies to sign contracts in Australia.
Author: Farrah Motley, an Australian contract lawyer.
Section 127(1) of the Corporations Act
Section 127(1) of the Corporations Act 2001 (Cth) states:
(1) A company may execute a document without using a common seal if the document is signed by:
(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director who is also the sole company secretary—that director.
Using a company seal is uncommon in Australia.
Signing in accordance with s 127(1) by using at least 2 directors or 1 director plus a company secretary (or, in the case of a company with only 1 director, that director) is generally an easier way for companies to sign contracts.
If, however, someone who is not a director (or a company secretary) signs the contract, the contract is not validly signed and may not be legally binding.
Further, if a company has 2 or more directors, but only 1 director signs the contract, that contract may also be invalid and not legally binding (ref: Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd).
By signing in accordance with the Corporations Act, the indoor management rule applies.