Authority of Directors to Execute Contracts on behalf of a Company

August 9, 2018

in Company/Partnership/Joint Ventures

Commercial transactions these days inevitably require execution of some form of documentation.

As the bulk of business is undertaken between companies the correct execution of documents by a company is a relevant issue.

Most people would assume that a director signing on behalf of a company binds that company to the contract however that is not always the case.

The Courts have made it clear that in the case of a single director of a company that director does have both actual and implied authority to bind a company to contractual arrangements.

However where there is more than one director of a company the situation is not so clear. Again, most people seem to presume that even if there is more than one director if one director of the company has signed the company is legally bound. The Courts are consistently now finding that is not the case.

Customary or implied authority of one director in the case of multiple directors to bind a company is very limited.

Certainty in any significant transactions involving property etc. the execution of any documents by one director where there is multiple directors will unlikely to be binding.

Under the companies legislation certain documentation (deeds) need to be signed by more than one director in any event where there is more than one director on the board. However the salient point to be taken out of this is that it is not safe to assume if you have a director signing a document that the document is binding.

To be certain you would require execution by a majority of the directors of the board of the company or copy of a resolution signed by the relevant directors authorising execution by one or more named directors.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Paul Farry
09 353 6671


The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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