Signing Contracts for Your Company: How to Avoid Signing in Your Own Name

Many owners incorporate a BC company so that the business, not they personally, carries the risk of its contracts. That protection depends on something easy to overlook: making it clear, every time, that the company is the one signing.

Contracts, quotes and invoices put together in a hurry often name the owner instead of the company, or use a trade name with no legal name at all. This article explains how to sign for your company and the gaps to close in your templates.

The company is a separate person, but only if the contract says so

A BC company is a legal person separate from its owners. When it enters a contract, the company is bound and its directors and shareholders generally are not. Our article on director liability in BC explains the main exceptions.

The company can only act through people, though. If a contract names you as the party, or you sign without showing that you are acting for the company, the other side may argue that you made the deal personally. Whether that argument succeeds depends on the document and the dealings as a whole, which is exactly the kind of uncertainty you want to avoid.

A signature block that works

The safest approach is a signature block that leaves no doubt about who the party is and in what capacity you sign. A typical block for a BC company looks like this:

• The company's full legal name, exactly as registered, including its ending. Under section 23 of the Business Corporations Act, an ordinary BC company's name must end with "Limited", "Incorporated" or "Corporation", a French equivalent, or an abbreviation such as "Ltd.", "Inc." or "Corp."
• "Per:" or "By:" before the signature line, showing that the person signs on the company's behalf.
• The signer's name and title, such as "Jane Lee, President" or "Authorized Signatory".

Make sure the party named in the opening lines of the contract matches the signature block. A contract that names "Jane Lee" as the customer but has a company signature block is an invitation to argue.

Show the company name everywhere you do business

Section 27 of the Business Corporations Act requires a BC company to display its name in legible English or French characters on all its contracts, business letters, orders for goods, invoices, statements of account and receipts used in BC, and on its cheques and similar instruments. It must also display its name in a conspicuous position at each place in BC where it carries on business.

This matters most when you operate under a trade name. If your van, website and quotes say "Coastal Renovations" but nothing shows that Coastal Renovations is a trade name of "1234567 B.C. Ltd.", a customer or supplier may say they thought they were dealing with you personally. Add the legal name, for example "1234567 B.C. Ltd., doing business as Coastal Renovations", to quotes, invoices, email signatures and your website terms.

The reverse is also a problem. Section 24 prohibits using "Limited", "Incorporated" or "Corporation", or their abbreviations, in a name unless you are entitled to, so a sole proprietor cannot add "Ltd." to look like a company.

Contracts signed before the company exists

Owners often sign a lease, a supply agreement or a purchase before the company is incorporated. Section 20 of the Business Corporations Act deals with these pre-incorporation contracts.

A person who signs a contract in the name of, or on behalf of, a company that does not yet exist is treated as promising that the company will come into existence within a reasonable time and adopt the contract within a reasonable time after that. If that does not happen, the person who signed is liable for damages for breaking that promise.

Once incorporated, the company can adopt the contract by any act or conduct that shows it intends to be bound. On adoption, the company takes on the contract and the person who signed is generally released, although the court can still be asked to apportion liability between them. The signer is not liable under section 20 at all if the parties expressly agreed in writing that they would not be.

The practical point is simple: incorporate first where you can. If you cannot, say in the contract that the company is being formed and set out whether, and when, you are released.

Personal guarantees are a separate question

Even a perfectly signed company contract can come with a personal guarantee. Landlords, lenders and suppliers often ask for one, and signing it makes you personally responsible regardless of how the main contract is signed. Our article on personal guarantees in commercial leases explains what to look for. Read every page before you sign, because a personal guarantee is sometimes built into the main contract.

Who can sign for the company

Section 146 of the Business Corporations Act generally prevents a company from denying, against someone dealing with it, that a person it holds out as a director, officer or agent has the authority usual for that role, unless the other party knew, or ought to have known, otherwise. In other words, if someone appears to have authority to sign, the company may be bound. Decide internally who may sign which kinds of contracts, and record it in a directors' resolution.

Review your templates

A short review of your standard documents usually catches most problems: quotes, invoices, purchase orders, website terms, engagement letters and email signatures. Our article on contracts every BC small business should have is a useful checklist.

Not sure your contracts bind the company and not you? Have your templates reviewed

Our business lawyers can review your signature blocks, quotes, invoices and standard terms, deal with contracts signed before incorporation, and prepare templates that show clearly who is contracting.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.