The third type of authority to sign a contract on behalf of a company – the presumed authority – is also better explained by example. An employee may have the actual or implied authority of his or her business to enter into a contract with another party. The employee does this and then signs another contract with the same counterparty. It may be that the company has given the employee the power to conclude the first contract, but the employee has not received a specific power to conclude the second contract. The law would say that the lack of power to sign the second contract does not matter: the party, on the other hand, has the right to assume that the employee had the power to conclude the second contract because he had the power to conclude the first contract. The authorization to sign on behalf of the company is a legal authorization for a person to sign official documents for a separate legal entity.3 min read While the legal signatures of the company require both an appropriate signature block and the required authority of the articles of association or a resolution of the board of directors, in some cases, illegal signatures bind a company to protect the interests of innocent third parties. If a person has the obvious authority to sign – for example, if the person holds a management title and works for the company – the company is bound by all the agreements that the person signs on behalf of the company with innocent third parties. Apparent authority may also exist when two officers of the same company, such as the secretary and the president, approve an instrument. When you start a business as a company, the company becomes a separate legal entity. Your name is no longer valid if you sign contracts between the company and another party. Representatives must be authorized to sign for the company. These representatives may include members of the board of directors, managers and other employees. If an employee who is not authorized signs a document or contract on behalf of the company, it can lead to legal problems.
Another interesting point is what happened after the contract was signed. If the other company has done something to promote the contract, e.B. has sent a cheque or taken other measures in accordance with the agreement, this could amount to ratifying the contract. The contract could then be considered valid. The short answer is almost always that the signatory`s company is fully bound by the performance of the contract, whether the signatory is a director or secretary or not. However, this does not mean that the party, on the other hand, should not take certain precautions in advance to verify the good faith of the signatory. An example of how a signatory is actually allowed to bind a corporation even if they are not a director is when they have a power of attorney or a less formal power of attorney, such as . B his name and example signature, which appear on a list of authorized signatories or a letter of power of attorney. The president usually has the general power to bind the company, and the manager usually has the general authority to bind the LLC, but you can`t be positive without seeing the articles and/or a resolution for the company.
[i] An analogy with the U.S. federal government is useful. The President of the United States has the greatest authority of any person in government. But even the president could take “unconstitutional” and therefore non-binding measures. The Constitution and perhaps the previous actions of Congress would have to be reviewed to be sure. Even then, there is room for conflict and uncertainty. You may need a Decision from the Supreme Court. The company agreement or articles of association are comparable to the constitution. Resolutions are comparable to acts of Congress.
In the event of a dispute, you may need a court decision to interpret the operating contract or articles of association of a limited liability company. [ix] See Kern v. J. L. Barksdale Furniture Corp., 224 Va. 682, 685, 299 P.E.2d 365 (1983)[Whenever a third party has to deal with an agent without further information about the actual authority, he does so at his own risk. If there is no representation relationship or if the authority of the entrepreneur is exceeded, the sole recourse of a third party against the intermediary. The principle is not related]. To avoid such disputes, developing clear company guidelines for signing authority may be the best course of action.
If an employee is only to sign on behalf of their company in a specific case and their belief in the implied power to sign in all cases must be restricted, it is recommended to create a power of attorney to authorize the signing, although this may not be appropriate on all occasions. Although a president or director of a company usually has the general power to bind his company, his power has its limits. For example, the general authority to operate a business does not include authorization to sell the corporation`s principal assets necessary to operate the business. [ii] The inherent or apparent authority of a company president is limited to shares in the ordinary course of business and does not extend to extraordinary and unusual transactions. [iii] When dealing with a limited liability company, you must use common sense about the normal course of business and the realistic authority of the agents you deal with. Sometimes the other party stops to question the authority of the signatory of the first party and to ask if such a signatory has the power to bind his company to the contract. Can the signatory`s power of attorney be refused? Can the company avoid liability because a director did not sign instead? Real authority and apparent authority are the two types of authority that one can have at the signature. Actual authority is when an agent has received express authorization to sign for a party; Apparent authority exists when an officer has been given implied authority. Actual authority is often given in writing to document an agent`s actions, while implied authority is implicit in various actions of those the agent represents. If a document claims to have been signed using one of the three methods mentioned above, there is a legal presumption in favor of a bona fide buyer for the value that the document has been validly executed. Nevertheless, the best practice is to seek the advice of a local lawyer regarding the enforcement requirements applicable in the respective foreign jurisdiction. .