“I Have Authority to Bind the Corporation”

Here’s a usage I haven’t written about before: placing under the contract signature block of an corporation, below the signature line, the notation I have authority to bind the corporation.

Some wrinkles: When a signature block provides for two signatures, the notation is in the plural: We have authority to bind the corporation. Sometimes corporation is given a capital C, but that would seem inappropriate, as in the contracts in question corporation isn’t used as a defined term. And I’ve seen the variant I have authority to bind the organization used when the signature block is for a limited liability company.
 
This usage isn’t common in contracts drafted by U.S.-based lawyers: the singular form occurs in around thirty contracts filed in the past year on the U.S. Securities and Exchange Commission’s EDGAR system. Roughly half of those contracts involved a Canadian company, so this would appear to be another instance of a usage that’s particularly popular in Canada. (See this April 2008 blog post regarding another such usage, dated for reference.)
 
This usage addresses a standard concern of contract parties—that whoever signs on behalf of an entity on the other side of a deal be authorized to do so. Most often you see this issue addressed in a representation by the entity, but that’s rather paradoxical: if a contract cannot be enforced against an entity because the person who signed on behalf of that entity wasn’t authorized, then the representation as to authorization will be unenforceable too. The same goes for addressing authorization in the concluding clause (see MSCD 4.20).

Is the notation I have authority to bind the corporation a useful way of addressing authorization? I don’t think so. It might give you some sort of cause of action—albeit a murky one—against an individual who turns out not to have been authorized, but it’s very unlikely that would constitute a worthwhile remedy. If you have any concerns regarding authorization, you should instead insist on having the entity provide you with evidence establishing authorization, namely a consent by the board of directors or other appropriate governing body.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.