Signing Contracts

Date: March 4, 2015

With the wear and tear from winter weather, and spring cleaning approaching, there may be several projects waiting in the wings for your association. Whether it be routine maintenance or a new construction project you will probably need to execute a contract for the work to be completed. Managers may be tempted to sign contracts for these projects, especially for a lackadaisical board or for a project that simply needs to be done. Managers, as a general rule, however, should avoid signing contracts for work performed for the association. In this article, I will discuss why and provide some best practices tips for managers.

Who Can Sign a Contract?

The governing documents for the association will, among other things, delegate the duties and responsibilities of the association, the board of directors, and officers of the association. They will specify who can execute contracts on behalf of the association and should always be reviewed to make sure they are being properly followed. Most often, they will require the president and the secretary of the board both sign contracts on behalf of the association. In some cases, an association’s governing documents may even give the board authority to delegate this duty to a manager. However, for the reasons described below, it is best for managers to avoid signing any contracts on behalf of the association

Consequences of Signing a Contract Without Authority

There are several possible consequences of signing contracts without the authority to do so. Among the most serious, the manager could be personally liable for the contract. If a manager signs a contract on behalf of an association, then it may appear to the contractor that the manager has the authority to enter into the contract, even if the manager does not, in actuality, have this authority.  Accordingly, the contract may still be considered a valid contract and the association will be bound by its terms and conditions.  If something then goes wrong or if the association later decides it got a bad deal, then it may attempt to hold the manager personally liable for signing the contract without the authority to do so.

Best Practice Tips for Managers

The best practice is for managers to, as a general rule, not sign contracts on behalf of the association. Read your governing documents to determine who has the authority to negotiate and enter into contracts for your association. 

If a board insists on having a manager sign, then you must first make sure that delegating that duty is allowed under the governing documents. Next, it would be best for the association to execute a resolution stating the board’s intention to delegate the duty and have its intention to execute a specific contract reflected in the association’s minutes. However, at the end of the day, it is best to avoid these situations and obtain the signature of the required board members.

If you have any questions or would like help in reviewing your governing documents, please contact your attorney.