During my time at Merlin Software, CE Pro 100 integrator AudioVisions, and as a consultant in this industry, I have had to address contracts many times. It amazes me how many companies allow employees to sign contracts with clients.
The simple question is: Would you let an employee sign a lease for a company vehicle or an office location? Would you let an employee switch your cellular agreement? The answer is always no! These are much smaller contracts and may not impact your business nearly as much as a project contract.
The solution is that only select people are allowed to engage the company into a contractually binding agreement. In case you were wondering, a contract with a client is “a contractually binding agreement.”
A previous CE Pro article about signing contracts cited Ken Kirschenbaum, an attorney in the alarm industry, who has dealt with this issue as well. Some companies try to control this issue with a clause in their contract stating, “This contract must be signed by an officer of the company to be valid.” I have only seen this a few times and thought contractors have moved on from this practice.
Putting that clause in the contract seems like a dubious attempt to manage employees. Anytime I see this, my “bad management radar” goes off and I start digging into the real issues. The problem is usually poor management that isn’t really engaged or a senior employee that believes they can “do anything they want to.”
There are some internal processes that need to be implemented.
1. Proposals Must Be Authorized Before Submitting to the Client
This is an offer that can be accepted. Clients become very unhappy when a proposal is either invalid, or worse, it will not work as designed.
A simple check list to verify profitability and functionality will prevent many problems.
2. Embrace the Legally Binding Digital Signature
This will allow an Officer and the Client to sign digitally, therefore removing the excuse that the proper person could not sign the contract.
These people have a smart phone in hand all the time and can digitally sign the contract.
3. Only Allow an Officer of the Corporation or Senior Management to Sign a Contract
Period, end of discussion. This does not mean putting a clause in to prevent sloppy management or the rogue employee. This is adamant policy that must be enforced.
The employee handbook should specifically call this action out as a terminable offense. You do have an employee handbook, don’t you?
This process will prevent bad proposals and contracts from the beginning, improve the client experience, facilitate the ease of doing business with you, and insure the success of the company.
