Prevent a Simple But Common Mistake: Properly Signing for Your Company
A preventable mistake that may jam up closing your real estate transaction is failing to properly sign on behalf of a corporation or limited liability company (LLC). Indeed, a surprising number of individuals who have authority to act on behalf of a company attempt to sign or initial an agreement by writing the company’s name or initials. This is generally not a legally enforceable signature.
For example, the president of XYZ Corporation should not write, “XYZ Corporation” on the signature line (whether in cursive or otherwise), nor should she initial, “XYZ” where initials are required. Instead, she should sign her name, and indicate that she is signing in her capacity as president of XYZ Corporation. She should likewise use her own initials.
This is because although corporations and LLCs are legal entities with the ability to sue and be sued, as well as transact business pursuant to state law, only certain persons within the company are given the authority to bind it. As a result, failure to identify who signs a real estate agreement on behalf of a corporation or LLC precludes inquiry into whether the signer actually had authority to bind the entity at all.
Another reason why a natural person with authority must sign her own name on behalf of a corporation or LLC – as opposed to writing the company’s legal name – is due to a legal doctrine known as the Statute of Frauds. Most states have adopted some version of the Statute of Frauds, which requires that an agreement for the sale of real property or even an interest in real property must be signed by the party against whom enforcement is sought. The purpose of a signature requirement is to prevent fraud, such as someone fabricating the existence of a contract to sell realty. Yet, while a natural person’s signature may be verified and validated, as well as a list of persons with authority to sign for the corporation reasonably ascertained, tracking how each one of these persons writes the company’s legal name (whether in cursive or otherwise) is impractical to the extreme. Generally, the latter is not a sufficient signature to satisfy the Statute of Frauds (or will be very difficult and expensive to prove in court).
Therefore, when you are signing on behalf of a company, keep in mind the need to sign your own name, but in your capacity as its authorized representative. The escrow officer overseeing your real estate transaction will thank you.
[Note: This post was originally published in the Real Estate Agent Magazine, Treasure Valley Edition.]