Definition and legal foundations of ‘Signing’
The term ‘Signing’ refers, in a legal context, to the formal signing of a contract or another legally binding document. Especially in corporate and contract law, signing is a central milestone in contract negotiations, particularly in complex transactions such as company acquisitions, mergers, and large financing deals. From a legal standpoint, signing marks the point at which the parties formally acknowledge the negotiated contract terms through their signatures and commit to fulfilling the agreed obligations. Signing is, however, of technical legal significance and does not necessarily represent the actual execution date (Closing).
Process and significance of Signing
Conclusion of contract and legal effects
Signing regularly constitutes the time of contract conclusion within the meaning of §§ 145 et seqq. BGB (German Civil Code). The legal effects of the agreement generally enter into force upon signing, unless the parties, particularly in the context of conditions precedent, tie the effectiveness of the contract to additional requirements. In practice, this is commonly the case in share purchase agreements or real estate transactions where the contract’s actual effectiveness occurs with the later closing.
Distinction from ‘Closing’
The closing regularly follows the signing chronologically. While signing creates the legally binding effect, closing is when all steps required for implementing the contract are carried out—for example, the transfer of the purchase object, payment of the purchase price, or registration of rights in the land register or commercial register. In many cases, it is stipulated that the contractual partners must fulfill certain obligations between signing and closing in order to bring about the closing.
Legal framework and formal requirements
Form and validity
The validity of signing depends on the form requirements applicable to the respective contract. In principle, according to § 126 BGB, written form applies unless another form is prescribed or oral form suffices. For articles of association, real estate contracts, and marriage contracts, notarized certification under § 311b BGB or specific commercial law provisions is often required. If the signing is not carried out in the required form, this may result in the contract being void.
Electronic signature
With ongoing digitalization, the electronic signature under Regulation (EU) No. 910/2014 (eIDAS Regulation) is gaining significance. It can legally replace a handwritten signature, provided there is no special formal requirement (e.g. notarial certification) to the contrary. The qualified electronic signature is equivalent to a handwritten signature pursuant to § 126a BGB and enables legally secure signing in digital business transactions.
Signing in corporate and real estate transactions
Signing in company acquisitions (M&A)
In the context of share purchase agreements, signing marks the parties’ agreement on all contractual points following sometimes extensive negotiations. Often, signing is subject to regulatory, supervisory, or contractual approvals. The purchase agreement usually sets out conditions precedent that must be fulfilled between signing and closing. Only when all conditions have been satisfied does closing take place, resulting in the transfer of beneficial ownership.
Signing in real estate law
In real estate law, signing is particularly important in connection with notarized certifications. The offer to purchase and its acceptance must be certified by a notary. The signature ‘signs’ the offer and/or acceptance declaration and thus initiates the legally binding process. However, signing alone does not lead to the land register transfer—this only occurs after closing.
Risks and legal consequences of signing
Binding effect and right of withdrawal
Upon completion of signing, the parties are generally bound by the contract terms. A withdrawal or contestation is usually only possible under narrow legal conditions, such as mistake, deception, or due to expressly agreed withdrawal clauses. It is common practice for the contract to specify the circumstances under which a withdrawal between signing and closing is possible.
Damages for breaches of obligation
If a party breaches obligations that exist between signing and closing—such as carrying out necessary registrations, obligations to inform, or obtaining regulatory approvals—this may result in claims for damages or contractual sanctions. Contracts often contain mechanisms to safeguard against the risk of non-performance, such as penalty clauses or security deposits.
International contract law and signing
Conflict of laws aspects
Signing plays a significant role in international contract law, especially in cross-border transactions. The validity of signing is governed by the conflict of laws rules (in particular the Rome I Regulation in the EU). Among other things, it must be determined which substantive and formal law applies to the signing and which form requirements, if any, must be observed.
Multi-party signings and remote signings
Especially in international transactions, it is common for several parties in different locations to carry out the signing (‘Multiple Signings’ or ‘Counterparts’). Techniques such as the use of facsimile signatures, electronic signatures, or submitting scanned signature pages are used, provided that no strict statutory form requirements stand in the way.
Summary and significance in legal practice
Signing is a legally significant step in the conclusion of contracts and is applied in various areas of law. It generally creates the binding legal effect between the parties; the actual implementation of the contract (closing) usually takes place at a later date. In addition to complying with special formal requirements, the conflict-of-law rules for international transactions and the admissibility of electronic signing procedures must be observed. Faulty or incomplete signing processes can have serious legal and economic consequences. It is therefore essential to organize and document the process and legal framework of signing precisely to ensure contractual certainty and legal clarity.
Frequently asked questions
Who is legally authorized to sign documents?
In a legal context, only those persons who are authorized to sign for the respective transaction or operation may sign documents. This may derive from statutory powers of representation (e.g. managing directors of a GmbH, members of the board of an AG) or from express power of attorney (e.g. authorized officer, deputy). The authority to sign follows from entries in the commercial register, internal regulations, articles of association, partnership agreements, or individual authorizations. In contract law, it is particularly important to ensure that only the legally authorized representative with corresponding authority can establish a legally valid commitment for the company. If a document is signed without sufficient authority, the transaction may, in case of doubt, be invalid or may lead to personal liability. The same representation rules apply to electronic signatures, but authentication procedures (e.g. qualified electronic signature) must also be used to ensure the identity and authorization of the signing person.
What legal requirements apply to electronic signatures?
Electronic signatures in Germany and the EU are regulated by the eIDAS Regulation, which distinguishes between simple, advanced, and qualified electronic signatures. Depending on the legal transaction, different forms of signature may be required: For transactions without formal requirements, a simple electronic signature often suffices; legal requirements for the written form, however, demand at least a qualified electronic signature that meets certain technical and legal standards. For qualified electronic signatures, it is essential that they are based on a qualified certificate and created using a secure signature creation device. In addition, the certificate provider must be trustworthy and officially approved. The burden and force of proof of a qualified electronic signature are equivalent to a handwritten signature according to § 371a ZPO. If lower forms of signature are used, this may lead to the document being invalid should a dispute arise.
How is the authenticity of a signature proven in case of a dispute?
In disputes, the party bearing the burden of proof must prove the authenticity of the signature. For handwritten signatures, this is usually achieved through handwriting expert reports or witnesses who were present at the signature. For electronic signatures, the evidentiary effect of the form of the signature is particularly significant: Only the qualified electronic signature has, by law, the same probative value as a handwritten signature. Authenticity is demonstrated by the underlying certificate and logged signature processes, as well as technical verification procedures such as validation of the signature chain. For advanced or simple electronic signatures, the party providing proof may have to present further circumstantial evidence (e.g., login credentials, correspondence, agreed system usage) to establish authenticity. The court then assesses this as part of its free evaluation of evidence.
What legal consequences can arise from unauthorized signatures?
If a document is signed by an unauthorized person, the transaction is generally only provisionally valid until the actual authorized person approves it retroactively (§ 177 BGB). In a business context, there is also a risk of liability for the signatory under § 179 BGB (agency without authority) if it was not expressly disclosed that they lacked authorization. For electronic signatures, criminal consequences may arise if, for example, identities are misused or digital signature systems are manipulated. If any damage occurs, the parties may assert claims for damages; in addition, internal disciplinary measures may be imposed. In the case of public or official documents, criminal offences such as forgery may also be applicable.
Which statutory form requirements must be observed for signing?
In a legal context, it must always be checked whether a particular form is required by law for the transaction at hand. German law recognizes the following principal forms: written form (§ 126 BGB), electronic form (§ 126a BGB), text form (§ 126b BGB), and notarial certification (§ 128 BGB). While text or simple written form are sufficient for many transactions, some matters (e.g. guarantees, termination of employment contracts, real estate transactions, marriage contracts) expressly require a handwritten signature or notarial certification. Electronic signatures can only replace the statutory written form if electronic form is expressly permitted. If the required form is missing, the legal transaction is void according to § 125 BGB—exceptions are allowed only by law.
When and how is an electronically signed document transmitted in a legally secure manner?
An electronically signed document is legally effectively transmitted when it is ensured that it reaches the recipient in a manner that preserves the integrity and authenticity of the signature and is reconstructible. In business transactions, this is ensured, for example, by qualified electronic signatures, secure email communication channels (such as DE-Mail, beA for lawyers), and revision-proof delivery systems. It is important that the recipient can validate the document and its electronic signature. Delivery is deemed completed when the document enters the recipient’s sphere of control. If transmission is insecure (without sufficient possibility to verify authenticity), legal certainty is not guaranteed. In specific cases, such as electronic court communications, special rules on signature and transmission must be observed.
What are the differences between signatures of private individuals and companies in a legal context?
Private individuals can generally sign any declarations of intent and contracts that concern them, provided they are legally competent and no special rules on representation apply. In a corporate context, however, signing authority is key: Corporate, commercial, and labour law provisions precisely regulate who may act in the name of a company. For example, in the case of GmbHs and AGs, only certain official representatives are authorized to sign bindingly. In addition, special powers of attorney (such as ‘Prokura’) may be required. For electronic signatures, it must be ensured that the name and function of the signatory are correctly documented so that it is unequivocally attributable to the company. If this allocation is missing or the authority is unclear, liability and contractual risks may arise.
