Signing a contract as a sole trader

ChicoMendez

Hi
Suppose im a sole trader.
Suppose i have registered to trade under a certain business name.
Legally can someone (ie a family member) sign a contract for my business, however not being an employee of my company?

Tnx

Victor

Only you or your agents (mostly, but not necessarily employees) can sign contracts. The person needs to have your authority or be reasonably expected to have your authority (very dangerous territory).

You can give someone specific Power of Attorney, but from your wording this isn't what you want.

Do you want to post something more specific?

Fergal C

My understanding is that as a sole trader you are the business. That is the business is not a separate legal entity.

Hence, when you sign a contract you are personally liable for it. If a family member signs the contract you will still be personally liable for it as the business is not a separate legal entity. The person signing it may also be found to be liable if it can be shown that they acted with fraudulent intent.

Specky

This gets into the area of "is a contract with a sole trader worth the paper it's written on?".

It's essentially a contract with an individual. If it's for any real value then you have to start wondering whether or not the trader is "good" for the money. Who wants to get into a costly legal battle to recover money from an individual who's probably only assets are a mortgaged house, car on a loan, tv on HP....etc.

Of course you haven't actually given any details about the nature of the contract so this could all be just academic if it's a straightforward agreement to provide service or whatever.

Victor

Originally posted by Henri
If a family member signs the contract you will still be personally liable for it as the business is not a separate legal entity.

Not necessarily. If my sister signs (with her signature) me up to a contract to sell my car to you for €1, without my permission, it is not binding on me.

ChicoMendez

Victor :

You can give someone specific Power of Attorney, but from your wording this isn't what you want.

No thats exactly what i want! Ok more specifics below-

Of course you haven't actually given any details about the nature of the contract so this could all be just academic if it's a straightforward agreement to provide service or whatever.

Im as a sole trader providing a service to someone. The contract will be under my business name. I want my brother to SIGN it with the client because as far as the client is concerned my brother is part of the company (but is really not! - ie not receiving a salary). Hes in fact just helping out to get this job done.

ye following me? - complicated situation.
But legally is that ok for him to sign the contract as representative of my Business.

Cheers lads

Victor

Originally posted by ChicoMendez
company

You are a business, not a company. Your financial arrangments with your brother are none of your client's business.

However, be careful that there is clarity in the contract, i.e. the parties are known and are clear. Otherwise, you might have an very unhappy brother (instead of you) being sued by the client.

Specky

Well I'm sure there must be a good reason why you just can't sign the contract yourself.....

Anyway, you really ought to have a contract between your brother and yourself defining the particulars of your business relationship even if it is only temporary. Family relationships like this don't imply anything and have no legal power. This document could also extend the power of contract signing to your brother for the particular period of his contract too.

Without something like this the contract between your company and your client wouldn't stand up as far as I can see because your brother is not you and you are the sole trader.

seamus

Originally posted by ChicoMendez
Im as a sole trader providing a service to someone. The contract will be under my business name. I want my brother to SIGN it with the client because as far as the client is concerned my brother is part of the company (but is really not! - ie not receiving a salary). Hes in fact just helping out to get this job done.

ye following me? - complicated situation.
But legally is that ok for him to sign the contract as representative of my Business.

Cheers lads

Legally, I don't think it matters unless there's a challenge against it. To be an employee, he doesn't necessarily have to be paid, nor does he have to sign a contract.
If the contract is challenged it's up to you to state that yes, he is employed by you.

Is it too much trouble just to sign it yourself? Sometimes the simplest solution is also the best.

ChicoMendez

Yes signing it myself would be the best option but for this project unfortunately the situation has to remain the way it is.

If i have stated in the contract that a representative of XXXXXXBUSINESS has the authority to sign the contract only.....

and my brother is my representative ....

then it should be ok.... if i have to i can sign a temp contract between myself and him.

is this the way to go?

ChicoMendez

oh this is all just errring on the safe side - i cant imagine anything going wrong with what im selling... touch wood!!

Victor

Originally posted by ChicoMendez
is this the way to go?

Perhaps. However if you are say trading under the family name (say) "Murphy - Building contractors" and your brother signs the letter "John Murphy" (let us say his name is John), then the contract is between John and client, not you and client.

This may have tax / other implications other than those above.

ChicoMendez

I can see where- yes the family name is part of the business name but the contract will state that the agreement is between the client and the business entity! it will also state that a representative of the business shall be allowed to sign it. That way i should be covered? SHould i not

Fergal C

Two risks in this situation are probably as follows.

1. The client doesn't pay.
With the signing situation you describe, the contract could still be valid and you would have a claim against the client. Unless the client were to claim that you deceived him as to who was doing the work and as a result of this deception the quality of the work delivered was not up to the agreed standard.

2. The client sues you.
In this situation the greatest risk could be to your brother. If you don't have money and your brother does the client may sue him.

If your relationship with your client were to turn sour and then he were to feel that you deceived him he will not be happy. My experience would suggest that it is always better to be upfront with clients about these things.

A safer option might be for your brother to agree a contract with the client in your brother's name and then sub-contract the work to you. The tax situation should not be a problem once your annual return shows all the income going to you.

If your business is growing and you are taking on larger contracts it might be time to consider forming a limited company and benefiting from limited liability.

De Rebel

As Victor said at the outset you are into a mine field here. Having some experience at corporate level of contract documents, it was policy to ensure that a contract signed by a business being a Sole Trader was only ever signed by the Principal of the business, with no exceptions allowed. The view was that because the liability was unlimited and personal to the sole trader to avoid doubt it had to be the sole trader who signed the contract. Any other signature would have left us with a burden to prove Power of Attorney and/or Power of Procuration on the part of the signatory.

I'm not sure why you are engaging in this debate. If it is important to you that the contract can be enforced by either party, then you should sign it. If you are trying to engineer a situation where you can wriggle out of the contract at some future date, get your brother to sign it. If you need a definitive answer in relation to a specific circumstance you should engage a commercial solicitor.

Consider also that if you do give your brother full power of Attorney, you are giving him authority to encumber all your worldly possessions.

Lastly, your comment that “I want my brother to SIGN it with the client because as far as the client is concerned my brother is part of the company (but is really not! - ie not receiving a salary)" is worrying. The client is signing the contract in good faith, assuming that your brother as the other signatory is something which you are clearly stating that he is not. This would be solid ground for the client to escape from the contract at a later date, if he so wished.

Victor

Originally posted by De Rebel
Any other signature would have left us with a burden to prove Power of Attorney and/or Power of Procuration on the part of the signatory.

Off topic, but this requirement could be very funny in the retail trade "Boss, can you authorise me to sell this bar of chocolate, in triplicate, please?".