One of the most perplexing things about contracts is determining who should sign them. United States law stipulates that a contract must be signed by a "competent" party to be considered legally binding. So what factors determine the competence of the signer? Three considerations come into play.
WHO IS ELIGIBLE?
First, the signer must be of legal age, which can range from 18 to 21, depending on the state. I recommend the signer be 21 years old, so there is no discrepancy. The second criterion is the signer must be at his or her full mental capacity at the time he endorses the contract. This means the signer cannot be insane or have his capacity impaired in any way, say by being intoxicated. As this latter point is difficult to prove after the fact, it is often not a valid factor in litigation.The third point is the person must have the proper authority to sign. This is a gray area and requires the most explanation.
An authorized signature is the key to establishing a binding contract. Whether the signer is a planner or a vendor, the individual signing the contract must have the legal authority to bind the organization to the contract. Who that authorized person is will vary from organization to organization.Many organizations have bylaws stating that only the CEO has authority to sign contracts. In such instances, the meeting professional does not have the power to execute a contract. But at other companies or associations, top brass may delegate signing authority to others within the organization. When working for either side, supplier or client, I like to go as high as possible in the corporate hierarchy to get a signature. That means if you can obtain the hotel general manager’s signature, the client should have a binding contract. On the planner’s side, it is best to have the signature of one of the firm’s senior officers, such as a vice president or CEO.
Some organizations limit signing authority to a dollar amount. For instance, contracts for expenditures under $100,000 can be signed by the planner; anything higher must be signed by the CEO. The courts also have adopted a concept of "apparent authority." This basically means if someone has signed contracts for the organization in the past and no one has objected, that signature is still considered legal, even if she has not been authorized as an official signer. However, I prefer not to rely on such ambiguous authority, which can lead to lawsuits.In a case that went before the U.S. Supreme Court, the justices found that an association that provided volunteers with letterhead with their names printed on it signaled to outsiders these people were capable of making legally binding decisions on behalf of the organization, when in fact these individuals did not have such authority. The court found the organization liable for millions of dollars for essentially giving apparent authority to volunteers to act unlawfully on its behalf.
DON'T GET PERSONAL
If an individual simply signs her name, she might be held personally responsible for failure of performance or the terms and conditions of the contract. This can get ugly and very expensive.To avoid such problems, be sure to sign contracts on behalf of your employer or client. For instance, "XYZ Corporation/Association, by Sue Smith, its authorized agent" (for third-party signers) or "by Sue Smith, meeting professional/vice president of sales, XYZ Corp."
Jonathan T. Howe, Esq., is a senior partner in the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., which specializes in meetings, travel and hospitality law. Legal questions can be e-mailed to him email@example.com.