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Is a contract considered valid if the employee that signed it did not have signing authority

Austin, TX |

my employee signed a contract without authority. is that contract binding to my company?

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Attorney answers 1


The contract may not be binding if the employee, in fact, had no authority. Larger business rely on agency in the performance of their dealings. Smaller businesses rely on agency much less.

Authority can be actual, implied or apparent. Actual authority is very clear; i.e. an employee's job duties require he/she bind the business (e.g. a buyer). Implied authority results as a matter of habit or a course of conduct such as repeatedly allowing an employee to bind the company. Apparent authority results when the party the business is dealing with reasonably assumes the employee has authority, the business is aware and does nothing to clarify the employee is not authorized. It some cases business titles can assume apparent authority such as director and above. Vice presidents are commonly assumed to have apparent authority.

The answer to your question lies in the facts surrounding whether your employee had one of the three forms of authority to bind the company.

The information I have provided is general information only and not intended to be legal advice. Please check with an attorney in licensed in your state for specific legal advice.

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