We are going to put the What Did You Agree To? series on hold for a few weeks. I have received a number of requests that I wanted to make sure that I entertained.
Jim asked me about who is allowed to sign a contract for a company. This is a very important concept. You have to make sure that who ever signs it for the company is authorized to do so.
Accepting the terms of a contract and signing it is called execution. Accepting the terms of a contract and performing on it without signing can also be a form of execution. For the purposes of this article we will focus on the written execution.
At the bottom of the contract will be a place for signatures. This is where the two parties sign the agreement and date it. There may also be an area for witnesses..
One of the common pitfalls in a contract is when a company tries the “not authorized” argument. This is common in car agreements, which is discussed in the next part. Essentially in some contracts it states that only certain members of a company are authorized to sign the agreement.
The authorized individuals may be a “C” level (CEO, CFO etc), or it may say sale manager, or general manager. Regardless ONLY the people who are listed as authorized to sign the agreement on behalf of the company can sign.
KEY POINT: Make sure the people who sign a contract are authorized to do so.
You may ask, if an employee signs a contract for a company isn't that good enough?
If you agree with the above question, then you make perfect sense. Certainly a company cant later say “well she was not allowed to sign”, therefore we are not bound. However it is not that simple. There are two elements you need to look at.
The first is if the contract actually lists in advance who the authorized agents for the company are. If it lists those people then you may have problems if it is signed by someone else. So always ask who is signing, and if they are listed as an authorized person. Better yet, ask WHO those people are before you sign.
The second issue is if there has been “substantial performance”. That means how much of the work have the parties done on the contract. If you have relied on the agreement that was signed by someone who had no authority, and both you and the other company have performed substantially, then in the majority of circumstances you can still hold them to it.
If you sign an agreement in your home, i.e. via a door to door sales etc, then you may be protected from certain laws. You can review the Door to Door Sales Article released in early Feb 09 on this blog.
So the most important part of this step is to make sure you understand how to sign the document, if a witness is required, and who is allowed to sign for the other party. If the document says a certain job title must sign, then ASK before you sign. There is nothing wrong with highlighting the areas you need to sign.
To avoid arguments, you need to ask to make sure the person representing the company is authorized to sign the agreement. Don't be afraid to ask to talk to a Manager for confirmation.
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