A lot of us are called upon to sign contracts or other documents on behalf of our employer or our own company. Because companies are fictional entities, a company cannot sign a contract. The company must act through an officer or employee with authority to enter into any type of contract, promissory note or lease. Typically, an officer or employee would not be held personally liable for the company’s debt should there be a breach of such an agreement is the contract has been properly signed and executed on behalf of the company. However, we have recently had a few cases where officers signed their names without titles and not conveying their intent to sign the document on behalf of a company in an official capacity. This has lead to lawsuits wherein the officer or employee who signed an agreement, with the full intention of doing so on behalf of the company, was personally sued, and sometimes was held personally liable when their company is in breach.
That is why it’s imperative that an officer or employee who is executing an agreement in an official capacity on behalf of his or her company, make sure that the other party knows that they are entering into the agreement with your company– and not you personally. Simple language in the agreement can easily alleviate the worry of being held personally liable when one’s company does not honor an agreement. First, make sure in the beginning of the agreement, where the parties are listed, that your company is listed as one of the parties and not you personally. Second, when signing the agreement, make sure that you write your company’s name above your signature, and your company title under your signature so it is evident that you are signing the agreement in your official capacity a a representative of the company. You can also write in language under your signature that states “on behalf of Company X.” That way there is will confusion and the other party to the agreement knows your intentions.
While adding a few words to an agreement may seem insignificant, it can they may save you being held personally liable for the debts of your company.
Just wanted to point out a small error… “That way there is will confusion and the other party to the agreement knows your intentions”. Thanks for the read!