Can Anyone’s Signature Make a Credit Application Enforceable?, by Michael C. Dennis

Can anyone sign a contract? Most people agree the answer to this question is No. For example, most people acknowledge that a Minor [someone under 18] cannot sign a valid, enforceable contract. So… who can sign a valid, enforceable contract on behalf of a customer? More specifically, who can sign a valid credit application on behalf of a business?

There are several requirements for creating a valid legal contract. One of the most important to credit professionals involves the idea of contractual authority. To be enforceable, the person signing the credit application must have authority to do so. What constitutes authority to do so? This question can be answered this way: Credit professionals often need to rely on the concept of ‘apparent authority.’ Why? Because creditors don’t know who has actual authority to sign the credit application on behalf of the applicant.

The intent of the legal concept of apparent authority is to protect third parties [such as creditors] who might otherwise incur losses if the signature received did not bind the debtor company. Basically, apparent authority means this: If a reasonable person [such as a creditor] believes the person signing the contract has the authority to do so, that signature is binding on the applicant company.

So, what do I look for? I look for the title of the person signing the application. I expect to see that an Officer or a business owner has signed the credit agreement. Do you agree? Do you disagree? I think this is worth discussing this with your attorney.

This topic will be covered at the upcoming CreditScape Fall Summit, September 17-18 at the Tropicana in Las Vegas when I moderate the panel discussion on collection compliance and best practices. For more information about the conference, visit I hope to see you there.

Michael C. Dennis is the author of the Encyclopedia of Credit (, a free, fast, internet resource for credit and collection professionals. He is a frequent instructor at CMA-sponsored educational events. His most recent book, “Happy Customers, Faster Cash,” is available at He can be contacted at 949-584-9685.


6 Replies to “Can Anyone’s Signature Make a Credit Application Enforceable?, by Michael C. Dennis”

  1. Michael,

    Coincidentally, I attended a CMA-sponsored talk last Friday given by Christopher Ng, an attorney who will be at CreditScape. His talk was on Battle of the Forms. I asked him the very question you posed above. I was left with the impression that in a commercial setting, particularly a continuing relationship, the creditor has an somewhat uphill struggle to deny the validity of a signed credit application, especially since they are or should have been aware that you were giving terms based on the existence of the application. This is true whether the application was signed by a Purchasing Manager, AP supervisor or potentially even a clerk.

    To further highlight the importance of the signer and the responsibility they assume, my credit application (in bold and in capital letters) reads:


    i have no certainty that this adds any level of validity to the application but it does put the signer on alert and may prompt them to have someone higher up the food chain sign instead. If they persist in signing, I would hope we as vendors have more reason to believe that the application is enforceable. This relates directly to your remarks regarding “apparent authority”.

    Good luck at CreditScape.

  2. Correction: July 28, 2015 at 3:44 pm

    Guy, I think the clause in CAPS above you suggested should be an idea that is in need of being widely adopted. Thank you for your important comments.

  3. We sure did talk about this topic last week at our CMA meeting. Michael is correct that apparent authority is key and a company is generally hard-pressed to argue that the signatory was unauthorized to bind the company especially if it is an officer, director, purchasing manager, etc. I agree that a clause similar to what you have incorporated in your agreement is a good idea.

    1. Also, as we discussed, the more generous the credit extension, the more diligence that should be done to ensure the signatory is a current officer or authorized agent. Sometimes, even a quick email confirmation acknowledging the signatory’s authorization from a third party at the company is helpful.

  4. For everyone who seems to think that the signature on the back of your credit card is about security – it isn t. While it can be a method of identity verification, the signature on the back of your credit card signifies your acceptance of the Cardholder Terms of Agreement that comes with your card.

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