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Are The Right People Signing Your Business Contracts?

A frequent mistake I see in business agreements is that the wrong people are signing them. The consequences of this issue can be expensive.

Here’s why…

If a contract signatory doesn’t have signing authority from the entity he represents, that company may not be legally bound to perform the agreement.

Even if there is signing authority, business contract signature lines are often screwed up so that it’s unclear in what capacity the person is signing.

For instance, if Sheila Jones signs her name on behalf of her company but neither her business nor her title is identified as part of the signature, one can make a strong argument that the signature was in a personal capacity (with personal liablity!) instead of as an authorized company representative.

Then there’s the missing signatory to a business contract. There are several common variations of this type of mistake. For instance, a person might sign in one capacity but fail to sign a second time in a different capacity. Because it’s common for a person to need to sign once as an individual (e.g., personal guarantee) and a second time as an authorized signatory (eg., President) of his company that’s a party to the agreement.

Then there’s the missing spouse consent problem. This frequently occurs in the sale of a business. For example, Mary Smith signs an agreement to sell her company. However, because her husband John may have a marital interest in the business (even if he doesn’t have equity titled in his name), the company’s buyer will want the husband to sign off his consent to the sale.

If you need help with your company agreements, it’s probably time to talk with an experienced business contracts lawyer like Attorney Mike Young.

Mike Young, Esq.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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