It can be a scramble to find the appropriate person to sign a contract or document when deadlines loom and deals need to be finalized. Yet board members should take care to ensure that properly authorized persons are signing their documents. Although a resident manager may have the most knowledge about the maintenance needs for the irrigation system, she probably is not the best person to sign the contract with the maintenance service.
How do you know who can sign? Look to your association’s bylaws. Most have a specific section on the execution of instruments and agreements. Typically the signatures of two officers will be required; sometimes the officers who must sign are specified. Of course, the board can usually adopt a general or special resolution authorizing a particular person or persons to sign.
These resolutions, however, should include the specifics of the contract. The board needs to maintain oversight, ensuring that the terms and conditions creating obligations for the association are appropriate and in the association’s best interests. Also recognize that some management agreements specifically prohibit the manager from signing agreements that bind the association.
If the bylaws are silent, the Nonprofit Corporation Act provides some guidelines. Even if your association is not incorporated, unincorporated associations can look to this act for guidance. Under Hawaii Revised Statutes §414D-158, contracts may not be invalidated for lack of authority if they are signed by the president and one other officer. So, if the bylaws are silent, get two signatures, one by the president and one by another officer. Also note that your officers are officers of the association, not the board. Therefore, they sign just as President, Vice President, Secretary or Treasurer and not Board President, Board Vice President, Board Secretary or Board Treasurer.
What happens if the wrong person signs? The board can ratify the action after the fact to authorize the signature. Also note that if an unauthorized person signs but the other party could reasonably believe that person was authorized, the association may have trouble getting out of the obligations of the contract.
The best course of action is to keep control of your contracts and make sure the proper people sign. And once everyone signs, be sure to keep a copy of that fully-executed contract in your files for future reference.