Tips For Signing Contracts For A Business Entity In Washington State
If you own a company such as a corporation or LLC, or even if you are just an employee of a company, you may sign contracts for the company regularly. Some are large and complex contracts, but many can appear to be simple contracts (such as Purchase Orders, Subcontractor Agreements or Change Orders). Regardless of the size of the contract, if you are signing for a business such as a corporation or a LLC, it is important the contract contain simple but specific language making it clear you are signing as an agent of the entity, not in your own personal capacity.
In Washington, courts will presume a person has signed a contract in his personal capacity unless the “clear and explicit language” in the contract shows he intended to sign for a business entity. If a person’s signature line on a contract reads “Bob Smith, President” with no additional language showing Bob signed for a corporation, a court will presume “President” is merely a description of Bob, not that Bob signed for a corporation. Bob will still be presumed personally liable for the obligations in the contract. In a lawsuit, Bob would have the burden of producing evidence to show all parties actually believed the entity was intended to be liable, rather than Bob himself.
The body of the contract (usually at the beginning) should identify the parties who are signing. For example, the first line could read: “This is an agreement by and between XYZ LLC and ABC Industries, Inc.” Next, the signature line must be proper. For example, say Bob is the owner and manager of XYZ LLC, and say Bob is signing a purchase order for the LLC for the purchase of lumber. Above the signature line of the PO (and every contract where Bob is signing for his LLC), we should find identification of the name of the entity. Beneath the signature line, we should find (a) Bob’s name and (b) Bob’s title. Here is how Bob should sign:
By: Bob Smith
Here is how Bob should sign if he were the president of a corporation:
By: Bob Smith
What if Bob is only a middle-manager for XYZ Corporation, but he has authority to sign an agreement hiring a subcontractor?
By: Bob Smith
Its: Authorized Agent
In short, the manner in which you sign a contract really matters. It is simple and easy to show you are signing on behalf of a corporation or LLC, not for yourself personally. But you have to include specific language if you want to avoid the presumption of personal liability.
If you have questions about business contracts, please call William O. Kessler, or one of the other attorneys at Beresford Booth PLLC.