Words “I have authority…” What if they are Missing? (Ontario)

Question:

If someone signs for a Corporation, they will usually add: “I have authority to bind the corporation”. What happens if they miss that? What if they refuse to add it afterwards? Is the agreement still legal?

Answer:

The words “Per: John Smith, I have authority to bind the corporation” were added to most contracts in Ontario coincident with the time that corporate seals were no longer required. That’s about 30 years ago.

So, this wording is now commonplace, but the actual effect is the same, with it or without it. This is in accordance with the common law rules related to “indoor management”.

Those rules have been codified in the Ontario Business Corporations Act. For registration of documents pursuant to the Land Registration Reform Act, those words are added to the appropriate documents.

It is very uncommon to see these words in any US based contracts. They either use corporate seals, or no reference at all, or if proof is required, notarial copies of the enabling By-Law and Corporate Resolution.

In Ontario, an Agreement of Purchase and Sale would be binding upon the Corporation, without the words added.

However, if the person lacked ostensible authority or the document was fraudulent, then it would not be binding. That’s also the case, even if those words were added.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Leave a Reply

Your email address will not be published.