There are times where you may not be able to sign your company’s contracts, and may need to delegate this task.
Or, you may be entering into a contract with a larger company and wondering who is legally able to sign on their behalf.
In a nutshell, any company may delegate signing contracts to someone else because of section 126 of the Corporations Act.
So here’s what section 126 of the Corporations Act says:
A company's power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company's express or implied authority and on behalf of the company. The power may be exercised without using a common seal.
Everyday contracts are contracts that you prepare and sign more frequently.
For example, client agreements or supplier agreements - these contracts are the perfect fit for delegation.
Because at some point, you may hire workers and may not be able to sign all contracts yourself.
And, when there’s a delegation for the execution of a company contract per section 126 of the Corporations Act, you don’t need to worry if you are on the giving or receiving end of a contract that does not have a director signature.
But, if you don't have a signature from the director/s of a company, then you'll want to see this statement above the signature block:
On behalf of 'example company'.
And the agent’s signature, on behalf of the company, is valid.
In this article, we are working on the assumption that the agent has authority to sign on behalf of an Australian company.
And one safety measure you can apply in your contracts is a simple authority clause like this one:
Each party warrants that they have the authority to enter into this agreement.
You can also complete due diligence checks online to make sure the agent is in fact able to sign on behalf of a company.
Below we'll look at the situation where there may not be any authority.
So what if you receive an executed contract that has not been validly signed on behalf of the other party?
Depending on the situation, the other party may be able to rescind or you may able to do so.
And, rescind means that you may be able to cancel the contract or have a court set it aside on fraud grounds.
I wish you every success in your ventures!
Feel free to comment or leave your questions below.
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