$100,000 Legal Tip About Signing Contracts

10 replies
Here's a legal issue you probably have not seen before about how to sign contracts. I saw it in a case my firm was asked to get involved with.

John Doe signs a $100,000 contract on behalf of his company:

Acme Marketing
By John Doe, President


There is a dispute and a lawsuit is filed. The lawsuit is filed against John Doe - personally.

He argues the company, and not him, is on the hook, and he was not even involved in the contract.

Court ruling: tough. Lawsuit to proceed against him personally.

Why?

Because the company is a corporation and "Acme Marketing" does not signify that a corporation is involved.

The legal analysis is a person signs a contract as an agent for a corporation (LLC, partnership, etc), but if the true entity is not fully disclosed then the agent also assumes liability on the contract.

It apparently was not brought to the court's attention that a "DBA" is publicly on file listing Acme Marketing as a name used by the company, so who knows what a future ruling may be.

Still, you may want to take a second look at how you sign contracts.

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#$100 #contracts #legal #signing #tip
  • Profile picture of the author Rod Cortez
    Thank you for sharing Brian. What kind of court was this? Was it at the Federal level? I'm also curious what state this was in if it wasn't at the Federal level. Thanks.

    RoD
    Signature
    "Your personal philosophy is the greatest determining factor in how your life works out."
    - Jim Rohn
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    • Profile picture of the author kindsvater
      Originally Posted by Rod Cortez View Post

      Thank you for sharing Brian. What kind of court was this? Was it at the Federal level? I'm also curious what state this was in if it wasn't at the Federal level. Thanks.

      RoD
      California state case.

      However, the legal analysis and reason for the ruling comes from the Restatement of Contracts - basically general rules of law. The import of that is this ruling is not specific to any California statute and the same type of ruling could likely be made in about any state (and I guess potentially in any country where English law has been used).

      .
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  • Profile picture of the author JohnMcCabe
    Great tip, Brian.

    I was advised, years ago, by an SBA SCORE adviser to use a standard signature for all company related legal docs. It was:

    John Doe, President for
    Acme Marketing, Inc.
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  • Profile picture of the author tpw
    I could have used this information 6 years ago Brian!!

    I was co-named in a filing related to my corporation. It cost me $6k.
    Signature
    Bill Platt, Oklahoma USA, PlattPublishing.com
    Publish Coloring Books for Profit (WSOTD 7-30-2015)
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  • Profile picture of the author keyon
    Originally Posted by kindsvater View Post

    Because the company is a corporation and "Acme Marketing" does not signify that a corporation is involved.
    So are you saying this would have prevented the problem?

    Acme Marketing Corporation
    John Doe, President

    I'm a little confused.
    Thanks
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  • Profile picture of the author J Bold
    Are you saying to use the full address of your corporation and make it clear you are signing for the corporation and not yourself?

    How does it become "fully disclosed" in this situation?
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  • Profile picture of the author seobro
    This is a warning to all of you. In the end you are the one that pays. Like it has already happened to me. Just more dirty little trick from companies. People do well to no sign. Hey, it is your money. If you want to throw your hard earn money away. Then on the dotted line you can sign.
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  • Profile picture of the author MajonInt
    We sign contracts all the time, its always good to have a reminder to pay attention and not let your guard down.
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  • Profile picture of the author BeeJay
    In Oz we have company seals, or legislation (Corporations Act, s127) that stipulates what has to happen for a Company to execute a document in the absence of its seal. It doesn't do away with the complexity of directors duties and liability but at least it makes the practicality of the signing clause less open to interpretation.
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