The word 'globalisation' means many things to many people but what does it mean for the construction and engineering industry? This article examines the issues which may arise in relation to the valid execution of documents when a UK Company enters into agreements with a foreign Company, which are governed by English law.
Reasons for execution by deed
UK companies (registered under the UK Companies Acts) in the construction and engineering industry are familiar with the execution of documents as deeds. The primary advantage is that a document executed by deed (formerly known as a contract 'under seal' which has now been abolished1) ) affords the parties a longer limitation of liability period of 12 years2. Ordinary contracts afford only six years.
A further advantage is that a deed also allows for the creation of binding obligations without the need for consideration, unlike ordinary contracts.
Formalities for the execution of a deed by a UK company
When an agreement is governed by English law (either de facto or by the choice of the parties) the requirements for the valid execution of a deed are straightforward3.
The document must be:
a) In writing;
b) Clear on the face of it that the parties intend it to be a deed;
c) Signed by two authorised persons4 of the Company and expressed to be executed by the Company; and
d) Expressed to be delivered as a deed.
The requirements for the valid execution of deeds by foreign entities under English law
The Companies Act of 1989 - together with supplementary legislation5 - provides for a foreign Company to execute a deed in one of two ways:
1. By writing under its common seal or in any manner of execution permitted by the laws of the territory in which the Company is incorporated. That is, in accordance with the legal requirements of the jurisdiction where the Company is registered. Such a document has the same effect as if executed under the common seal of a Company incorporated in England and Wales; or
2. By expressing it to be executed by the Company under the signature(s) of the persons who are authorised to sign documents on behalf of the Company, in accordance with its domestic law. "A person or persons who, in accordance with the laws of the territory in which the Company is incorporated, is or are acting under the authority (express or implied) of that Company"6.
Note that whilst execution by writing under a Company's seal is no longer the sole prescribed method of execution as a deed it...