An agreement signed on behalf of a company without authority may still obligate the company if it acted upon it

October 15, 2019

A lessee and a corporate lessor negotiated after the term of the lease agreement was about to expire, and a new lease was signed under significantly better conditions for the lessee. Upon termination of the relationship, the lessor contended that the new lease agreement was not duly signed by a signatory thereof and does not obligate it and is therefore it is entitled to additional payment in accordance with the old lease.
The Court rejected the lessor’s claim for payments under the old lease. The new lease was not executed by a signatory of the company and is thus not obligating the company unless it ratified it, but this is only if the other party did not know and need not have know about the lack of authority. However, since the lease agreement was signed, the lessor issued invoices pursuant to the new agreement and in the new amounts corresponding with it and did other actions that in effect constitute ratification of the new lease agreement. In doing so, the lessor accepted the new lease agreement by conduct and adopted the actions of those who signed on its behalf without authority.