Binding Signatures Ensure the signer has the authority to do so

by: Robert C. Goldberg, general counsel for the Business Technology Association

Arecent case provides a lesson both in transactions with your end users and your own dealings. A dealership was successful in taking a major client from a competitor. The competitor, unhappy with the loss, continued to call on the client, pointing out deficiencies in the products installed and the services rendered.

Eventually, the competitor convinced the end-user company to cancel its lease, maintenance and support agreements with the new dealership and resume services with the competitor. The end user questioned how it could walk away from the agreements it had entered. Although the migration to the new dealership’s equipment and services was not without issue, none rose to the level of a material breach. The competitor suggested that the customer terminate its agreements, stating that the individual who executed them was not authorized to do so. Thus, the contracts could not be enforced against the end-user company.

Not wishing to involve the competitor with a claim for interference with a contract, the dealership principal decided to proceed against the end user. The principal faced losing the business and a breach of his representation to the leasing company that the signature on the lease was valid. Being a sixfigure transaction, the stakes were high.

This is a lesson for anyone who signs contracts or purchase orders for his (or her) company: Unless you want to be personally responsible for performing the contract, be sure the document clearly indicates that you are signing as the company’s representative.

A suit was filed against both the end-user company and the individual who signed the contract. The individual who signed the contract was sued for breach and the end-user company was sued under the theory of quantum meruit. Quantum meruit stands for the proposition that a reasonable sum of money should be paid for services rendered or work done when the amount due is not stipulated in a legally enforceable contract. In simple terms, if you receive and accept a benefit, you must pay for it.

Fortunately, we had a “learned judge” who ruled in our favor. The court held the individual personally responsible based on two factors. First, when signing the document, the individual did not indicate a corporate position or title. Only his name was signed and, thus, he was found personally liable for the purchase. Second, the terms and conditions provided that the individual signing the agreement represented he had the

authority to do so. If the individual did not have authority (as the company contended), then the representation was untrue and the individual was responsible.

The court also found the end-user company responsible under the contract, as it had accepted the services and used the equipment. The court entered judgment against the individual for breach of contract and against the company for quantum meruit, awarded the same damages against each and attorney’s fees, and held the defendants jointly and severally liable. Jointly and severally liable means either party could be made to pay the entire sum.

The court held that because the contract “bears Mr. X’s signature and does not mention his employer or indicate representative capacity in any way ... it unambiguously shows it is the obligation of Mr. X personally.” The clear message being that when having an end user sign a document, make certain he has the authority to do so and indicate his position. Likewise, when a dealer enters an agreement, be certain to always indicate his title or position. Finally, check your transactional documents to ensure a representation is made that the individual signing has the authority to do so. n Robert C. Goldberg is general counsel for the Business Technology Association. He can be reached at robert.goldberg@sfnr.com.