May 6, 2026 | 10

Who can sign a business contract?

Literally anyone can sign a contract on behalf of your business, even without your permission. Whether your business will be bound by that contract depends on the signer's authority—and that's not always clear-cut. Businesses with multiple owners or employees are at greater risk of this becoming a problem.

Actual & Apparent Authority

Actual authority to sign contracts is straightforward—it's the people you, as the owner, authorize to sign on behalf of the company. This often includes high-level employees.

Things can get sticky when it comes to apparent authority. Someone who seems like they have authority to sign, even if they don't have actual authority, could still bind the company to a contractual obligation. Apparent authority depends on the third party's perspective and whether they reasonably believed the company representative had authority to enter into the contract.

This all comes from the law of agency, which applies to businesses and in many other contexts.

Businesses with multiple owners and/ or employees should take special care to define who has authority to sign contracts on behalf of the business, or face the consequences.

Best Practices to Avoid Being Locked Into Unauthorized Contracts

To avoid the appearance of authority when there is none, business owners should act in ways that show insiders and third parties whether someone has authority to bind the company.

• Clearly state who has signing authority in a written policy or governing documents;
• Explain the parameters of an employee’s authority in a written job description (especially high-level employees);
• Give employees appropriate titles that don’t sound like they convey more authority than they actually have;
• If an employee oversteps their authority, act quickly to nip it in the bud and correct any misunderstandings;
• Set clear expectations with third parties when delegating tasks to someone else in the company (e.g. telling someone “please negotiate the details with our Assistant Director” vs “please negotiate the details with our Assistant Director before I review and sign;”
• Keep organized records of written policies and documents.