KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Subcontract - questioning validity of contract - Last Chance - free webinar - today at 1 PM EST - register now
October 25, 2017
October 25, 2017
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questioning validity of contract
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Ken,
I just read the “Contract Cancellation” article and found it to be well-written and very informative.
Here is a scenario that is not referenced within the article that I wanted to see if you had any thoughts on:
Company A presents contract to company B to sign (for B to perform subcontract work)
Reps from both companies sign contract
Work is performed under the contract (B as subcontractor for A)
Company A expressly breaches contract on multiple occasions (failure to compensate in accordance with the contract)
Company B terminates contract
Company B later learns that representative that signed contract for company A was never a legally authorized signatory
Would it be reasonable for company B to take the position that since the company A rep. was never legally authorized to sign the contract that the contract was actually never valid?
Best Regards,
Timothy R. McGreal, P.E., ME, FPE, CFEI
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Response
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So we have a subcontract agreement, the subcontractor does some of the work, contractor doesn't pay for the work, and subcontractor now questions whether the contract was properly authorized.
Why would the subcontractor need to or want to take position that the subcontract was not validly executed by the contractor? I suppose there could be reasons, but the only one that comes to mind is that the subcontactor wants to terminate, walk away, from the subcontract and doesn't want to risk getting sued for breach of contract.
However, in your scenario the contractor has already breached the agreement by not paying, or as you put it, "failure to compensate in accordance with the contract". If the contractor has breached then the subcontractor can terminate, UNLESS, the contract deals with non-payment and provides that the subcontractor has to continue working until the dispute is resolved. But absent that or similar provision, the subcontractor can stop work and terminate the subcontract.
Determining that the person who signed for the contractor was not authorized seems far fetched. Once the subcontractor began performance, and certainly once a payment was made by the contractor for the work, it seems to me that the contractor would have ratified the contract and accepted the contract as valid and enforceable.
This does bring up important issues, including the serious consequence of entering into contracts with others who are not actually authorized to sign the contract. We get that kind of defense all the time in our collection cases, subscribers claiming that whoever signed the contract didn't have authority. That defense may work if no work has been done, and might even work if a few payments were made because the subscriber will claim that, yes, it knew an alarm system was installed, did receive and did pay monthly invoices, but never knew about the contract and certainly didn't authorize its employee, or non-employee, to sign the any contract.
The best practice when getting any contract signed - subcontract or a contract with the subscriber - be certain who you are dealing with and that the person has the authority. Be sure to use our Standard Form Subcontract Agreement when you are hiring a sub or performing as sub. It lays out the issues you should be concerned with - just follow the terms in the agreement.
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NOTICE: Free Employment law webinar - sign up today. Scheduled for today - Oct 25 2017
REGISTER for a Free Employment Webinar
Topic: EMPLOYER AS HOSTAGE? HOW TO TERMINATE FMLA COVERED EMPLOYEES
Description: Once an employee finds herself covered by FMLA, a common complaint from an employer is poor job performance. But the FMLA employee is now untouchable, because protected, right? Not necessarily. Join Kieran Bastible, Esq. and Jonathan Rogoff, Esq. of K&K's Employment Department for a discussion about Employer's rights against non-performing and abusive employees covered by FMLA.
Who should attend: HR, management and owners
Presented by: Kieran Bastible, Esq and Jonathan Rogoff, Esq. of K&K's Employment Department
Date and Time: Wed, Oct 25, 2017 1:00 PM - 1:45 PM EST
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com