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Example from https://www.lawinsider.com/clause/authority-to-sign

Authority to Sign. Each of the persons signing below on behalf of any party hereby represents and warrants that s/he or it is signing with full and complete authority to bind the party on whose behalf of whom s/he or it is signing, to each and every term of this Agreement.

I once heard the point is that if the person signing doesn't have the authority to bind the company, then you can sue them instead of suing the company, which is presumably easier. Is this correct?

Wouldn't such a clause be desirable in any contract where someone is signing on behalf of a company?

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you can sue them instead of suing the company, which is presumably easier. Is this correct?

Not necessarily. Some scenarios where that presumption would be inaccurate are:

  • An impersonator who disappears. The court will eventually grant default judgment, and yet it will be very difficult or impracticable to actually recover losses that resulted from his misrepresentation(s).

  • A person with true authority to enter contracts on behalf of a company is murdered. The person's death gives the company the opportunity to [tortiously] deny that the murdered person was authorized to enter contracts. Disproving the company's misrepresentation only increases the hassle of litigation and discovery.

  • The company benefited from the contract falsely entered on its behalf. This enables to viably sue the company for unjust enrichment, in which case the advantage of suing the impersonator instead of suing the company is quite questionable.

Wouldn't such a clause be desirable in any contract where someone is signing on behalf of a company?

Yes, although a clause of that sort is unnecessary because the conduct could be actionable under one or multiple legal theories such as fraud, tortious interference with relation, or unjust enrichment, or by statute. Furthermore, the circumstances might warrant a finding of an implicit contract to which the company is a party, thereby defeating the allegation that the company did not actually enter the written contract.

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  • Whoever keeps downvoting answers should be less shady and make an effort to articulate why he presumes answers are wrong. – Iñaki Viggers Sep 12 '20 at 10:08

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