QUESTION: Who is supposed to sign contracts with vendors? An attorney once told me that any board member can sign a contract, so long as the board approves. Our treasurer insists the president is the only one who can sign the contract. Who is correct?
ANSWER: The attorney is correct.
One Signature. A contract signed by any officer, whether authorized or not, will be deemed valid if the vendor reasonably relied on the signature. In addition, an association can be bound by a single signature or no signature if the association partially performed the contract's obligations, or accepted the benefits of the contract, or subsequently ratified the contract in its meeting minutes.
Two Signatures. How can vendors protect themselves from a rogue director signing agreements? The Corporations Code calls for two signatures from officers--one signer being the president or vice president and the other one the secretary or treasurer. (Corp. Code §7214.) In the event the corporation were to challenge the authority of the signers and attempt to void the contract, the signatures of two officers...
provides a conclusive...evidentiary presumption of authority on the part of the specified corporate officers to execute the document in question on behalf of the corporation. (Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th 754, 783.)
Minutes. If officers wish to protect themselves against claims they acted without authority, they should ensure meeting minutes record the board's approval of the contract and their authorizing of officers to sign it.
Signature Blocks. To protect officers against the perception they are personally signing a contract on their own behalf (making them personally parties to the contract), the signature block should have the name of the association as the party followed by the name and title of the officer signing on behalf of the association. For example:
The Sunrise Homeowners Association, Inc.
John Doe, President
This makes it clear the HOA is a party to the contract, not the president. There should be additional language in the opening paragraph of the contract identifying the association, not the officers, as parties.
Recommendation: To avoid expensive legal problems, all contracts should be reviewed by legal counsel. To reiterate, ALL contracts should be reviewed by legal counsel.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.