Who Can Sign a Contract for a Company: Everything You Need to Know
Parties who can sign a contract for a company are those who have been given the authority to represent their company in contract negotiations. 3 min read
Contract Signing Authority Overview
Parties who can sign a contract for a company are those who have been given the authority to represent their company in contract negotiations. These can either be parties who have the actual authority to sign contracts on behalf of their company, or parties who have been given the apparent authority to do so. Establishing who has the proper authority to sign contracts on behalf of a company is an important issue to resolve, as confusion related to this issue can contribute to many contract disputes.
Who Has Signing Authority?
Once a business is incorporated, the business is considered its own legal entity, meaning the owner can no longer sign their name on business contracts on behalf of the company. Rather, this task falls to authorized representatives such as managers, although, there are also instances where other employees may act as agents for their company.
The authority to sign a contract varies depending on the type of company involved. The following are common arrangements for each business type:
- Sole proprietorship. Signing authority lies with the owner, since a sole proprietorship is not considered to be a legal entity separate from the owner. This situation is unique among business types.
- Partnership. Signing authority should lie with a general partner who can sign on the partnership’s behalf. Limited partners do not have the authority to bind the partnership, so they should not be allowed to sign for the partnership.
- Corporation. Signing authority often lies with the company’s chief executive officer (CEO) or president. If an individual signs on behalf of a corporation and they have not been given the authority to do so, the corporation will not be bound to the contract.
- Limited liability company (LLC). Signing authority usually lies among managers or members, and ideally, the parties who have such authority should be indicated in the operating agreement.
Actual Authority and Apparent Authority
Actual authority and apparent authority are the two types of authority one may have in signing. Actual authority is when an agent has been given explicit authorization to sign for a party; apparent authority is when an agent has been given implicit authority. Actual authority is often given in writing, thereby to provide documentation for an agent’s actions, while implicit authority is implied through various actions of those whom the agent represents.
Generally, managers who often sign for their company will have been given explicit authority, while others who sign will have been acting on implicit authority, and it is from the latter that disputes relating to proper signing authority often arise. An agent may reasonably believe, due to various affirmative statements or actions of their company, that they have been given the authority to sign a contract, when this may in fact not have been the intention. If this occurs, the company may then be bound to the contract or it may not, depending on the facts of the case.
Signing authority disputes can be highly fact intensive, with the outcome dependent on various factors, including but not limited to:
- The agent’s past conduct.
- The agent’s job duties and title.
- Whether the contract is a consumer or business-to-business contract.
In order to avoid such disputes, drawing up clear corporate policies on signing authority may be the best course of action. If an employee is only meant to sign on behalf of their company in a specific instance and their belief in implied authority to sign in all instances is to be curbed, drafting a power of attorney to authorize signing is recommended, although this may not be appropriate for all occasions.
Signing for a Company
Properly signing a contract may seem like a simple procedure, but there are some details an authorized agent should keep in mind, such as:
- Dating. Make sure you date your signature and the other party does so as well, since contracts do not have to be signed on the same day and dates should not be assumed.
- Last-minute changes. If last-minute changes are necessary before signing, the best practice is to print out a new, revised contract and sign it. However, changes that are handwritten into the document or included as addendum are also acceptable.
- Retain copies. Each party to an agreement should retain copies for their records. If a contract is to be signed in ink, a copy should be signed for each party. Electronic contracts featuring electronic signatures should be printed out to maintain a physical record.
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