In any given contract, the signature block for a legal entity will routinely contain two signature lines rather than just one. Why have two people sign for one party?
I suspect that in most or all contexts it’s because the organizational documents for that entity require that two officers sign all contracts, or contracts worth more than a stated amount.
I suppose if you’re concerned about authorization, having two officers sign would offer greater confidence that yes, the entity had indeed authorized entry into the contract in question. But as I point out in yesterday’s post, if you’re concerned about authorization your best bet would be to seek direct evidence on the subject.
Can you think of any other reason to have two people sign for one party?
13 thoughts on “Having Two People Sign for One Party”
The nature of the document itself (rather than of the organisation concerned) may require two signatories. For instance, under English Law for a corporation to execute a deed more than one signature is required. The document’s execution under seal (i.e. as deed rather than a simple contract) confers a longer limitation period, removes questions of consideration, and is required where (e.g.) the document seeks to transfer real property. I have no idea whether similar provisions apply in US law.
It probably has little to do with a requirement in a charter and more to do with purchasing policies or some other operational issue. Often you’ll see something like a procurement department requirement that a contract be signed by the person who will use the good or service and a disinterested person. It’s a checks-and-balances thing to make sure there’s nothing unseemly going on. It also likely has to do with the “success has a hundred fathers, failure is an orphan” mentality in corporations. If it’s a “good” contract, everyone wants their name right on it; if it’s bad (i.e., “risky”), no one wants to be the only name out there.
I think you might have looked at this one from the wrong perspective: it’s probably the signing party requiring two signatures for its internal purposes, rather than a counterparty requiring it for belts and suspenders on authority.
In the EU, the main rule is that a company is represented by its managing board (the terminology for the various board structures and their national naming is something for another occasion). Alternatively, a company’s articles of association may provide that the company can also be represented by one or more of its (managing) directors. To avoid legal uncertainty for the company at hand, only the company being represented as such may claim that it was not duly represented by the signatory/person. This is statutory law, which may serve as part of the explanation you seek.
Some uncertainty may remain on the side of the other contract party, which is in practice not problematic since also case law provides appropriate safeguards. Also in theory it is often not problematic because the authority to sign must be registered with the Companies Register (and the information in that register may be deemed to be reliable by third persons).
At least in the Netherlands, many (if not the majority) of companies’ articles of association require two signatures for a company to become bound by any legal act (e.g. a contract). I don’t know whether this is a remainder of old ages, but I do know that many companies find it a perfectly safe way of doing business: businessmen need to pass two stages with two sides of a deal being considered. Each person would take his or her own approach and accordingly, such nowadays things as ‘compliance’, ‘risk management’ improve.
The only time I’ve ever appreciated the other party signing twice was a contract where the counterparty was styled “CustomerCo, on behalf of itself and its affiliates” (which always looks like an ultra vires problem to me). CustomerCo was some obscure shell sub of BrandNameCo. The second signer was a publicly documented officer of BrandNameCo, which gave comfort to my client that the customer wasn’t trying too hard to insulate itself from the deal.
In UK law, two directors can always bind a company (or at least, if the Articles say that they cannot a counterparty is entitled to rely on their authority to enforce the contract). A single director or executive may be authorised to execute the document, but if they are not the counterparty cannot enforce the contract.
The signature of two directors therefore means that the counterparty has no need to check signing authority (or conversely that the other party has no need to produce it).
In addition, as mentioned above, two signatures are required to execute a deed (or a power of attorney authorising a single person to enter into a deed).
I think for these reasons contracts often include two spaces – if the drafter doesn’t know who will sign (it may come from a template, for example), two covers all eventualities.
Usually though, when I see space for two signatures (and I know, as is invariably the case, that a single person will be signing, with the correct authority) I delete one – otherwise people tend to see the blank space and keep asking whether a contract has been properly executed.
I’ve frequently encountered the situation where a company requires that that two signatures are required on contracts.
In my experience, that requirement customarily stems from the company’s bylaws (or equivalent document) or corporate authority documents/policies (e.g., bank book of authorized signatories, corporate resolutions).
To illustrate, one signature might be required from an authorized signatory of the business line to which the contract relates as well as a signature from an authorized “Credit Risk Management” person.
Foreign banks will typically provide two signatures on a contract to which they are party.
For California corporations, at least, there is a presumption of due authority if a contract is signed by, for example, the President and the Secretary (or the CFO and the Secretary). There may be similar statutes in other states.
My employer often requires two signatures on our agreements. The type of agreement and the dollar amount are the two triggers which bring additional signatures into play. The theory is that the risk is better managed if two people sign. As a public educational institution we are tremendously risk averse and as such the powers-that-be feel that this is required.
It is not unusual for two people from my company to sign an agreement. Only principals (shareholders) have authority to bind the company. However, a more junior person may maintain the client relationship and both that individual and the client like to have that person also sign.
Ken, perhaps the issue is the mix of what is the minimum required to bind a company legally, on the one hand, and on the other hand a management control feature that requires two signatures in order to ensure proper staffing-up of the commitment about to be undertaken. Corporate by-laws typically describe who can bind a corporation and if/how that authority can be delegated – and I view that as the minimum legal requirement. But query whether a contract counterparty of yours can claim a contract was not properly authorized because some management edict about two signatures wasn’t followed? By the way, what I have seen most often addressed specifically in by-laws are corporate guarantees, where, for instance with my employer, two signatures are required (and just any two signatures, but one from column A (treasury side) and one from column B (controller side). The by laws of a major airline I dealt with many years ago required corporate guarantees to signed by the chairman, and no one else – what a pain that was.
In California, a community property state, when you have been negotiating only with one spouse, it is prudent to have the other spouse sign the agreement. Although one spouse may enter into an agreement that binds both spouses, having the non-negotiating spouse sign removes (okay, dramatically reduces) the possibility of a later claim of fraud or collusion.
When the Florida Legislature contracts as a single party, the signatures of the President of the Senate and the Speaker of the House of Representatives are required.
The Senate and the House each enter into contracts for some of the myriad goods and services that a political bureaucracy needs, but most of the administrative support (accounting services, information technology, consultants, property leases, insurance, etc.) for the Legislature is provided by a joint unit called the Office of Legislative Services.
Its contracts are in the name of “The Florida Legislature” and the presiding officers (Speaker and President), or their designees, execute those contracts.
Because the presiding officers never signed on the same date, I always provided an effective date clause to be “upon execution by the parties.”