Question:
Ken,
In commercial applications a facilities manager, operations manager or
other such person is often the one who signs the alarm Agreement. I
recently received a letter from the principal of a corporation requesting
cancellation of their contract because the individual who signed (title on
Agreement is Operations) “was not an authorized signatory for the company”.
Can you provide some insight on this situation?
David Coon, President
Covan Systems
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Answer:
Because my law firm probably does more litigation of alarm contracts then
any other firms we are faced with this issue often. A subscriber wants to
cancel a contract and claims that it is not bound because the person who
signed the contract had no authority to do so.
Typically a corporation claims that the person signing was not an officer
and could not bind the corporation. Sometimes it can be a homeowner who
claims that the person who signed is not an owner.
We have heard all kinds of excuses. Signatory was just a friend watching
the store; a relative who happened to be staying at the house; a clerk;
receptionist; or completely unknown to the one who claims to be the right
person to sign.
You have a right to rely on the apparent authority of the signatory. That
does not mean that you can ask a receptionist to sign the contract and
expect it to hold up. The receptionist no doubt did not have the apparent
authority so you could not justifiably rely upon her execution of the
contract. Where however a "manager" negotiates and executes the contract
you can have justifiable reliance. Where the only person in the store
discusses the contract, security needs and signs the contract, you can have
justifiable reliance.
There are two other important issues besides apparent authority.
First, did you commence performance of the contract. In other words, did
you do an installation? How far did you get with the installation? Did you
begin monitoring, and for how long? How many times were you called back on
your service contract? Obviously the more you performed the less credence
is going to be given that the one who signed for for your services did not
have authority. Where was the one with authority while you were doing your
performance? The legal theories are ratification or acquiesce of the
contract. Of course we often hear that the real owner saw the alarm going
in or accepted the alarm service for a period of time, but never saw the
contract or agreed to its terms, usually the long term contract payments.
Second, did you get paid from a company check? This too evinces
ratification or acquiescence.
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Take a scenario where you sit and negotiate a contract with an "operations
manager". He signs your contract. You don't get a check with it. Next day
you hear from a corporate officer who tells you, sorry, but the operations
manager had no authority to sign. You haven't performed yet and there is
little likelihood that you would prevail if you decided to sue on that
contract.
As you change the facts you get closer and closer to being able to enforce
your contract. Maybe you got a check from the corporation, signed by a
proper person; maybe you started or completed the installation; maybe you
got paid for 3 years and the corporation decided to claim the operations
manager had no authority only after it decided to move its business to a
new location.
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Here is the Alarm Law Issues page link.
http://www.kirschenbaumesq.com/legal.htm
Here is the link to the Articles Page
http://www.kirschenbaumesq.com/articles.htm
I have written articles addressing this situation in the first instance.
See the article at http://www.kirschenbaumesq.com/legal_side.htm#cas e32
You should take precaution to ascertain that the person signing the
contract has authority to do so. Generally a corporate office is
sufficient, as is the designation of partner or owner or manager. Be sure
to get a business card, and when possible a check. If you see a check from
a business without a corporate designation, such as Inc or Corp, ask for
the correct name and get a copy of some license or other document that has
the correct name on it. Taking these precautions at the beginning of your
relationship with the subscriber can help avoid later claims that the
contract should be void.