Mistakes to Avoid with Client Contracts: Who Should Sign & Who Shouldn’t?

Making a sale is always supposed to be a good thing … right? To make sure, it’s important an integrator’s sales team, project managers and technicians are properly documenting the sale … and that includes signing the contract or change order. Sounds simple enough.

But a custom integration or security company owner cannot be everywhere at once, so it is vital that his employees follow the proper procedures to make sure the sales agreement is legally valid. And even when they do, there is certain language related to signatures in your agreement that you might think is helping protect you but it actually can hurt you.

Employee Signatures vs. Owner

According to legal expert Ken Kirschenbaum of Kirschenbaum & Kirschenbaum, columnist for CE Pro’s sister publication Security Sales & Integration, integrators should authorize which individuals from their company they want to be able to legally sign contracts with clients, but in reality, it may not matter whether they have authorization or not.

Kirschenbaum says a contract becomes valid once anyone in an integration company signs it, whether they had authorization or not. He notes that a customer can legally rely on the fulfillment of the contract no matter who signs, unless the clients knew that the person who signed had not authority to do so.

“So yes, your salesman out in the field can sign the contract,” he notes.

Adding a Signature Provision Is Dicey

So to protect yourself from unauthorized signatures, should your contract include some sort of provision stating to the effect that “this contract is not valid unless signed by an officer of the Company”?

Nope, says Kirshenbaum.

“My office does a lot of collection work for the alarm industry so we see a lot of contracts when the alarm company decides to sue the subscriber. We also do a lot of defense work for the alarm industry and we see the alarm contract when the alarm company is sued and we need to rely on that contract. We see contracts that are not signed by the alarm company, by anyone. Sometimes the subscriber hasn't signed either.”

He says that when an integration company adds language stating “this contract must be signed by an officer of the company to be valid” it does not protect them against a client who might argue that the contract is not valid or enforceable. In fact, it can come back to bite them.

“Unfortunately courts do not always treat the [signature] omission as a two-way street,” he says.

In other words, in an instance where the integration company did not sign the contract, a court may decide that the integrator cannot enforce the contract against the customer. But in the same situation where a client is trying to negate the un-signed contract, the court may rule that the contract is invalid because the integrator did not sign it.

“Crazy, but the company caused its own problem by including the provision and then not complying with it,” he says.

On the other hand, Kirschenbaum says that once the integration company has performed under the contract, installed or started installing a system, the client can assume that the company has approved the contract, even if it was not signed.  

Kirschenbaum says the matter of signing contracts is “an unnecessary problem which can be better addressed by properly training the salesperson or even requiring the salesperson to call in the deal before the salesperson is permitted to sign the contract for the company.  If a company has only a handful of new contracts each month then the owner is most likely involved in the sales transaction anyway. If the company is signing up hundreds of [clients] each month then the added oversight is probably a waste of resources and added expense; train the sales help better or give sale term guidelines that can't be changed.”