Signatory warranty: Overview, definition, and example
What is a signatory warranty?
A signatory warranty is a statement or guarantee made by a person signing a contract or agreement, confirming that they have the authority to bind the party they represent and that the agreement is valid and enforceable. Essentially, the signatory warranty ensures that the person signing the document is authorized to do so on behalf of the company, organization, or individual they represent and that they have the legal capacity to enter into the agreement. This warranty protects the other party to the contract by confirming that the signatory has the power to act on behalf of the represented entity, avoiding potential issues if the signing is later deemed invalid.
Why is a signatory warranty important?
A signatory warranty is important because it provides assurance that the contract or agreement is legally binding and enforceable. Without this warranty, there could be a risk that the person signing the agreement does not have the proper authority to do so, which could lead to legal disputes or challenges over the validity of the contract. The signatory warranty helps to prevent situations where a contract could be later contested because the signatory did not have the authority to bind the represented party. It also protects the other party from potential harm, such as having to deal with an unenforceable agreement or legal actions due to unauthorized signing.
Understanding signatory warranty through an example
For example, a corporate officer of a company signs a contract with a supplier to purchase goods for the business. As part of the contract, the officer provides a signatory warranty, assuring the supplier that they have the authority to sign on behalf of the company and that the company is legally bound by the terms of the agreement. If it turns out that the officer was not authorized to make such agreements for the company, the supplier could potentially seek legal recourse based on the signatory warranty.
In another example, a representative from a nonprofit organization signs a fundraising agreement with a donor. The representative provides a signatory warranty confirming that they have the authority to execute the agreement on behalf of the organization. If the representative did not have the necessary authority, the donor could challenge the contract, but the warranty would provide protection in proving that the organization is legally bound by the contract as long as the signatory had proper authority.
An example of a signatory warranty clause
Here’s how a signatory warranty clause might appear in a contract or agreement:
“The undersigned warrants that they have full authority to sign this Agreement on behalf of [Company Name], and that this Agreement, when executed, will be binding upon the Company. The signatory further warrants that they are not aware of any limitation, legal or otherwise, that would prevent them from entering into this Agreement on behalf of the Company.”
Conclusion
A signatory warranty is a vital part of ensuring that contracts and agreements are valid and enforceable by confirming that the person signing the document has the authority to do so on behalf of the entity they represent. This warranty protects all parties involved by providing confidence that the agreement is legally binding and prevents challenges related to the authority of the signatory. It is a common and necessary element in many contracts to ensure clarity and avoid potential legal complications.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.