Can a contract be enforced if the person who signed it lacked authority?

Why does signing authority matter?

Businesses generally expect contracts to be signed by someone who has the authority to bind the organization. Questions may arise if:

• The signer exceeded their authority.
• Internal approval requirements were not followed.
• The signer acted without the business's knowledge.
• The contract required approval from another person or governing body.
• The other party had reason to question the signer's authority.
• Company policies limited who could sign contracts.

These issues can affect whether the agreement is enforceable and who may be responsible under it. Whoever signs must have authority under applicable law or the corporation's governing documents.

What evidence can affect the outcome?

If a signer's authority is challenged, the surrounding circumstances often become important. Relevant factors may include:

• The signer's job title and responsibilities.
• Prior contracts signed by the same person.
• Company policies or governing documents.
• Emails or other communications about the agreement.
• Whether the business accepted the benefits of the contract.
• Whether the business later approved or acted under the agreement.

The facts may help determine whether the business intended to be bound despite the authority issue. A business may later ratify the agreement or may be bound because the signer had apparent authority or because the business accepted the benefits of the contract. Maintain all records.

What to do next…

1. Review who signed the contract and what authority they had.
2. Gather communications and documents related to the agreement.
3. Determine whether the business later accepted or performed under the contract.
4. Review any company policies or governing documents related to signing authority.

What to consider in your specific situation

• The type of business and its internal approval requirements.
• The signer's role and apparent authority.
• Whether the other party reasonably believed the signer had authority.
• Actions taken by the business after the contract was signed.
• Prior dealings between the parties.
• Applicable laws governing agency and contract formation.

Since every situation is different, consider getting more information through Rocket Copilot or an attorney review to move forward more confidently.