Today the Law Shucks blog posted this item about a former IBM executive, David L. Johnson, who is claiming that his noncompetition agreement with IBM is unenforceable. One element of his defense is that he signed the contract in the space where IBM was supposed to sign. According to Bloomberg:
Johnson told Robinson he signed the agreement on the space where IBM was supposed to sign because he thought it would prevent the contract from taking effect. His lawyers said it was up to IBM’s human resources department to make him to sign the agreement or punish him—something that didn’t happen.
“The notion that Mr. Johnson intended to be bound by that agreement is absurd,” Johnson’s lawyer, Michael Banks, said at the hearing.
In their post, Law Shucks said they hoped that I’d have something to say about this—and I heard the call!
If Johnson’s defense were limited to the fact that he had signed the contract in the wrong place, he would likely have a tough time getting any court to buy his defense. Here’s what 1-2 Corbin on Contracts § 2.10 has to say generally about such matters:
A signature may be operative without respect to its position on the document, although it is customary to sign at the end of the writing and beneath the written provisions. There must be satisfactory evidence that the signature was affixed with intent to authenticate and express assent to the entire document.
And in a few minutes of rooting around on Westlaw, I found a relevant case, Karapanos v. Boardwalk Fries, Inc., 837 P.2d 576 (Utah App. 1992). Here’s the relevant language:
Karapanos argues that because he signed in the wrong place, the agreement was never executed. We disagree. Black’s Law Dictionary defines “execute” as “[t]o perform all necessary formalities, as to make and sign a contract.” 509 (5th ed. 1979). In addition, “it is a general rule that a signature located anywhere on a contract is sufficient to authenticate the instrument if it was placed there with the intent to do so.” Pio v. Gilliland Constr., Inc., 276 Or. 975, 560 P.2d 247, 250 (1976); see 1 Corbin on Contracts 122 § 31 (1950). Karapanos admits he intended and believed the agreement to be enforceable when he signed it. In fact, he assigned his interest under the agreement to Guardian State Bank to secure a loan. He also flew to Maryland to receive training from Boardwalk. Boardwalk similarly conducted itself as if the agreement were fully enforceable. Boardwalk gave Karapanos confidential and proprietary materials, including operation and training manuals, business plans, budgets, and equipment specifications. It was only after Karapanos began having doubts about his decision that he questioned the enforceability of the agreement. Therefore, we conclude the parties executed the agreement, and we will enforce the agreement as it is written.
The lawyers for our former IBM executive would doubtless distinguish Karapanos by saying that Johnson never did anything to suggest that he thought the contract was enforceable. The problem is that the way you comply with a noncompetition agreement is by … doing nothing. So lack of any indication of assent other than Johnson’s signature wouldn’t seem to prove anything.
But there’s more to Johnson’s story that the fact that he signed in the wrong place. Apparently IBM never signed the contract and returned the original to Johnson, who refused requests to sign another. So the story is murkier than it seems at first glance.
13 thoughts on “Questionable Defense of the Month: “I Signed the Contract in the Wrong Place””
Seems to me Mr. Johnson intended to commit fraud if he deliberately signed in the wrong place, hoping that this would make the contract non-enforceable.
Fraud’s a strong word, but it seems to me the sort of strategem that shouldn’t “work”. If you don’t intend to be bound by a contract, don’t sign it at all, anywhere.
Not so fast — suppose Johnson did sign in the wrong place with the intent of not consenting. Then, apparently, IBM discovered the ruse and sent him another contract to sign. At that point, IBM rejected the document and proffered a new one for signature. But Johnson never signed the replacement and thus, no agreement.
Its a little like sending a check without a signature, forcing the recipient to mail it back. Not ethical, but it works. (No I am not recommending this approach, especially not to my clients)
Cliff: I agree that apparently there was no contract and hence no fraud. [Actually, why did I say this? I have no idea what the elements of fraud are!-KAA] But let’s consider further why he signed in the wrong place. My analysis didn’t go into that, but the way things unfolded makes it entirely possible that he did in fact intentionally sign in the wrong place. I can think of only two reasons for his doing so, both of them bad. Was that his way of saying he wasn’t willing to be contractually bound? If so, a far clearer way of conveying that message would have been not to sign at all. Or was he hoping that IBM wouldn’t notice and that down the road he’d be able to invoke the “I signed in the wrong place” defense? Not only would that have offered little chance of success, it would also have been unseemly. Either way, if Johnson intentionally signed in the wrong place, he didn’t cover himself with glory. Ken
This may be one of those cases where the court delivers a stern lecture to the defendant before letting him go.
People frequently sign contracts in the wrong place unintentionally, intending to be bound. If they were to later claim in a court that they did not in fact intend to be bound, perjury would be a more relevant topic than fraud. I am not saying I think that is the case here, of course.
I also think that the “intention” limb of the contract test is objective, not subjective. If the state of mind is therefore not strictly relevant, would it in any case be perjury to make false statements about it to the court?
If you deliberately sign an agreement in the wrong place, is this a criminal forgery? Mis-dating an agreement can be a forgery under section 9(1) of the UK Forgery and Counterfeiting Act 1981, so by extension perhaps mis-signing with intent could be? Some key sections of this Act read as follows:
A person is guilty of forgery if he makes a false instrument, with the intention that he or another shall use it to induce somebody to accept it as genuine, and by reason of so accepting it to do or not to do some act to his own or any other person’s prejudice.
An instrument is false for the purposes of this Part of this Act—
(a)if it purports to have been made in the form in which it is made by a person who did not in fact make it in that form; or
(b)if it purports to have been made in the form in which it is made on the authority of a person who did not in fact authorise its making in that form; or
(c)if it purports to have been made in the terms in which it is made by a person who did not in fact make it in those terms; or
(d)if it purports to have been made in the terms in which it is made on the authority of a person who did not in fact authorise its making in those terms; or
(e)if it purports to have been altered in any respect by a person who did not in fact alter it in that respect; or
(f)if it purports to have been altered in any respect on the authority of a person who did not in fact authorise the alteration in that respect; or
(g)if it purports to have been made or altered on a date on which, or at a place at which, or otherwise in circumstances in which, it was not in fact made or altered; or
(h)if it purports to have been made or altered by an existing person but he did not in fact exist.
Mark, that is very interesting, particularly sub-paragraph (c). Fraud is indeed a big word, but we shouldn’t be too shy about it. I had been thinking about whether the broader offence of “dishonestly obtaining property by deception” (which is a statutory species of fraud) could also potentially apply. (Again, this is a UK offence so slightly off the point in this case, though doubtless there are similar US equivalents).
Of course, the counter-argument to both charges in a case like this would be the executive’s claim that it would have been obvious that the agreement was not binding, in which case there was no deception (or at least no intent to deceive or intent to induce somebody to accept it as genuine).
I think this is like arguing about whether signing the contract with one hand while crossing your fingers behind your back will vitiate the agreement. Putting aside instances of coercion, the question is “Did the signator mean to sign the document in such a way as to convey to interested persons an intent to sign the document?” That is enough to make the execution complete by that party. Of course, that doesn’t answer the question about the effect of the other party not “falling” for it, as may be the case here. But it really has nothing to do with where the contract was signed, or if it was signed in a fashion to mislead as to some undisclosed, secret intention.
Cliff Tuttle’s comment here is very interesting. Without comment as to what actually happened in the case, let’s say Johnson signed in the wrong spot deliberately in order to indicate that he didn’t intend to be bound. You say “IBM discovered the ruse” but does this mean it knew what he intended or that it simply mechanically rejected the contract as having been signed in the wrong place? Either might be true – he might have returned the contract under cover of a letter saying “I have signed in the wrong spot to show that I do not intend to be bound by your ridiculous attempt to stick me with these terms”, or said words to the same effect to an IBM person across the table. But barring something like that, wouldn’t IBM have been in a position to assume that he intended to sign and manifest his intent to be bound, but just picked the wrong spot? This is of course just another way of saying what Ken and others have already said – the question is not what Johnson intended subjectively by signing in the wrong place, but what a reasonable person in IBM’s position can construe from what Johnson actually did.
I deal with many standard-form document issues in my practice, and this type of situation is a common one. When a document has been mailed in from the hinterland from a signer who immediately departed on a six-month hunting trip after signing the document, it is difficult advice to give that we should reject the document because it’s been signed in the wrong spot. Generally, I’m not talking about employment contracts, and the problem normally affects one document among many, and this admittedly makes it easier. But I think the question still remains – without additional facts, should the recipient of a document signed in the wrong place have to take into account the possibility that the signer did it on purpose to indicate non-assent? I don’t think so.
Why? Was he compelled to sign something that he didn’t won’t enforced?
It seems to me that Johnson is claiming that he intentionally defaced the contract in order to make it unenforceable, and IBM’s lawyers *agreed*. They declined to sign and sent him another copy to “do it right”, which he declined to do. No contract.