This Wisdom of the Crowd, compiled from responses posted on the New to In-house Forum and Small Law Departments Forum* addresses who has the authority to sign contracts.
*(Permission was received from ACC members quoted below prior to publishing their Forum Comments in this Wisdom of the Crowd Resource)
Question
Our legal department consists of my assistant and I. Technically, only two individuals in the company have authority to sign on behalf of the company - the Chief Executive Office (CEO) and the Vice President (VP). In unusual circumstances, when neither are available, the Chief Financial Officer (CFO) will sign. Currently, our VP is on leave so that often leaves only the CEO or the CFO. The CFO doesn't really want to sign contracts and has asked why I don't sign them. I have read/heard that General Counsel shouldn't sign contracts because of a potential conflict (I could probably not elaborate on that if asked). I am wondering what others do as far as signing contracts. Any input is appreciated.
Wisdom of the Crowd
Response #1: I see there being two issues- signing a contract can leave you becoming a fact witness to the substance or intent of the contract in a later controversy. This could be a conflict under most states rules of professional conduct (you generally aren't allowed to advise on a legal issue where you are also a testifying fact witness).
Some companies also see it as a problem with the delegation of authority. If you are the main reviewer and approver on the contract (main line of risk assessment), there should be a second person to read and sign it (second set of eyes). This limits the risk of fraud.1
Response #2: My business-side folks are ready to hear my internal controls-like explanation for not personally signing, especially those in accounting and operations, so I tend to limit my explanation to that rather than some of the other risks (e.g. being asked to testify). Nor do I sign litigation settlement agreements (except when asked to signify my approval "as to form" of the document, which is rare but clearly within my legal purview/role). Generally, I have found that the appropriate person with signing authority is pretty clear from the content of the agreement, but otherwise, I default to our Chief Operating Officer (COO) or CFO if COO is out.
I would be curious to see any "authorized signer" policies that others have formally adopted and that were used in a growing business, as ours is occasionally problematic for the other departments as the business scales.2
Response #3: As legal counsel, I review and revise the contracts so it is a breach of our internal controls (and a conflict of interest) for me to sign the same contracts I review and approve. We do have an exception for confidentiality and non-disclosure agreements and other documents that do not bind the company to a financial obligation.Is your CFO hesitant to sign the contracts because he/she has not been delegated the authority to do so? We've had the situation come up before and we resolved it via a delegation of authority from an authorized signer (when the authorized signer was going to be unavailable for an extended period of time) or via an email from an authorized signer (typically reserved for urgent matters) to a delegate.3
1Response from: Amanda Kitzberger, Vice President, General Counsel, Secretary, Clopay Plastics Products Inc. (4/9/2016)
2Response from: Graham Gerritsen, Associate General Counsel, Surna (4/13/2016)
3Response from: Tina Wilcox, Corporate Counsel and Secretary, Midwestern BioAg, Inc. (4/8/2016)
Region:
United States
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