If an employee signed a contract for credit card services, is the business bound to that contract?

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If an employee signed a contract for credit card services, is the business bound to that contract?

Also, is the individual who signed it obligated to pay a early termination fee?

Asked on September 30, 2011 under Employment Labor Law, Alabama

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

As to whether the business is obligated, that is a question of authority, both actual and apparent. If this employee, by his or her title/position, able in fact to execute such contracs (e.g. a controller, a VP, etc.), then the company is bound. Even if the employee could not in fact execute this contract, if to a reasonable outside, he or she should be able to (e.g. a manager of a department), then the company is still probably bound because the person had "apparent authority" and the outsider (the credit card company, for example) may rely on that authority--though the company may, in turn, be able to take legal action against the employee for cost or loss he or she caused by exceeding his or her authority.

As for whether the person who signd it must pay an early termination fee, first check the contract--who (signatory or business?) would nominally be responsible. If the business, and if the contract is enforceable (see above), the company should pay--though again, if the employee acted improperly, the business may be able to recover the cost from the employee, if it chooses and deems doing so worthwhile.


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