Who Can Sign a Contract for a Corporation in Michigan?
Every Livonia business attorney has encountered a contract improperly signed by people without the authority to do so. When running a business, ensuring the right person signs contracts on behalf of your corporation or LLC is vital. If an unauthorized person signs an agreement on behalf of your company, the contract may not be legally enforceable or binding. Depending upon the nature of the contract, this could put your business, its engagements, and its property at risk.
In this article, we’ll explore who has the authority to sign contracts for a corporation in Michigan and how businesses can protect themselves.
Understanding Corporate Authority in Michigan
A corporation is a legal entity that operates through its officers and authorized agents. It is, however, a separate legal person from its officers and agents. When you sign a legal agreement with an LLC or corporation, you are not making an agreement with the human being with whom you’ve negotiated. You are contracting with the corporate entity itself.
This is true regardless of the fact that the corporation or LLC is capable of speaking only through its human actors.
When do those human beings handing out business cards have the actual ability to make the corporation or LLC they represent do what they say it will?
Michigan Law and Who Can Sign a Contract
In Michigan, corporate authority is primarily governed by the Michigan Business Corporation Act (MBCA). The authority of limited liability companies (LLCs) is governed by the Michigan Limited Liability Company Act.
In addition, the company’s internal governance documents, such as its operating agreement, bylaws and board resolutions, shareholders’ agreements, etcetera, also govern the question of who can sign.
Businesses must ensure that only individuals authorized to enter contracts, buy or sell real estate or other property, or generally act on behalf of the corporation or LLC by these sources of law enter into agreements on the corporation’s behalf.
Who Typically Holds Signing Authority?
The individuals most likely to hold the authority to execute a company’s contracts are as follows:
- Corporate Officers
- President & CEO – Typically has broad authority to sign contracts.
- CFO or Treasurer – May sign financial agreements, loans, and tax-related documents.
- Vice Presidents & Other Officers – Authority depends on their specific role and whether the board has delegated signing powers to them.
- Board of Directors: The board of directors plays a key role in approving contracts, especially those involving significant financial commitments or strategic partnerships. In many cases, the board must pass a resolution to authorize certain agreements.
- LLCs: Manager/Managing Member/Sole Member
In an LLC, the LLC’s Operating Agreement should designate a Sole Member, Managing Member, or Manager with the authority to enter into contracts. The LLC’s operating agreement should describe the powers of the Manager, furthermore. Among these powers may be the power to delegate signing authority to another Member, any Member, or even an Authorized Agent of some sort.
In all cases, a Livonia business attorney will review the constituent documents of the Corporation or LLC carefully.
Delegation of Authority
The bylaws or operating agreement may, as mentioned, provide an Officer or Manager with the authority to delegate the authority to sign a contract to an agent. This would generally be accomplished via Resolution. In some cases, a Power of Attorney (POA) may also be properly used. But the devil will be in the details.
What Happens If an Unauthorized Person Signs?
If someone without proper authority signs a contract, several legal issues may arise:
- Contract Invalidity – The contract may be deemed unenforceable if the signer lacked authority.
- Personal Liability – The individual who signed could be held personally liable for obligations under the contract.
- Legal Disputes – The corporation may have to litigate or renegotiate the agreement, which can be costly and time-consuming.
How to Fix an Unauthorized Signature
If a contract is signed by someone without proper authority, there are ways to remedy the situation:
- Board Ratification – The board can formally approve the contract after the fact, making it legally binding.
- Amendments & Re-signing – The parties can renegotiate and have an authorized representative sign a revised agreement.
- Legal Review – A Livonia business attorney can assess the situation and provide guidance on the best course of action.
Best Practices for Metro Detroit, Michigan Businesses
To avoid complications, businesses should implement the following best practices:
- Clearly Define Signing Authority – Outline roles and responsibilities in the corporate bylaws and update them as needed.
- Use Written Resolutions – Ensure major contracts are backed by board resolutions granting specific authority.
- Train Employees & Officers – Educate staff on who can and cannot sign contracts to prevent unauthorized agreements.
- Consult a Business Attorney – A Livonia business attorney can review contracts, advise on corporate governance, and ensure compliance with Michigan law.
Who Can Sign a Contract: Final Thoughts
Understanding who can sign contracts for a corporation in Michigan is essential for protecting your business. By establishing clear policies and ensuring only authorized individuals execute agreements, companies can minimize legal risks.
If you need assistance with corporate contracts or governance, a Livonia business attorney can help you navigate these complexities.
Contact our office today for expert legal guidance tailored to your business needs by clicking the button below to schedule an initial consultation.