MBE Rules · Business Associations
Statutory Signature Authority
Cal. Corp. Code § 313
The rule
An instrument signed by both a chairman/president-level officer and a CFO/secretary-level officer binds the corporation in favor of a third party without actual knowledge of the lack of authority.
In plain English
Statutory Signature Authority allows a corporation to be bound by documents signed by certain high-level officers, specifically when both a chairman or president and a CFO or secretary sign. This means that if a third party relies on these signatures, the corporation cannot later claim that the officers lacked the authority to sign.
Worked example
A corporation's president and CFO sign a contract with a supplier, but the president was not authorized to enter into that contract. The supplier, unaware of this limitation, can enforce the contract against the corporation because both high-level officers signed it.
Memory hook
Double-signature, double assurance: two top officers mean the deal's a done deal!
The trap
Exams may present scenarios where one officer's authority is questioned, leading students to mistakenly think the contract is void. Remember, as long as both required signatures are present, the corporation is bound.
How examiners test it
Questions often involve a fact pattern where a contract is signed by the necessary officers, but there is a twist regarding one officer's authority, testing the candidate's understanding of binding corporate actions.
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