Creating a legal obligation for your company is a serious duty. Not everyone who works for or with you has this authority.
The Journal of Urgent Care Medicine explains that if someone enters a contract and legally has the right to do so, you have to honor the contract, which is why it is essential to know who in your business holds this authority.
The problem
When someone without authority enters your business into a contract, it can lead to lawsuits. Those in charge may not pay invoices or honor the terms of a contract because they are unaware it is legitimate. It can create stress in the workplace and lead to personnel problems.
Who can sign
In general, signing authority should be something you limit. Those who have signing authority are typically the business owners and those they give power to. For example, the owner and manager in a small business may have signing power, but other employees do not.
Avoid issues
To avoid issues with contracts, you need to have internal policies that clearly outline who can sign contracts or create contracts within the company. Your policy also should outline what someone should do if there is a need for a signature on a contract and they do not have the authority to sign. It is essential to make it clear the exact people who have this right and to outline a disciplinary process for someone who does not have permission to enter contracts yet does it anyway.
Clearly outlining who has signing power in your business will help to prevent problems and keep everyone aware of how to handle all contracts and agreements.
