Is My Company Bound by a Contract an Employee Signed Without Authority in California?

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

Your company is bound by a contract an employee signed without permission only if the employee had actual or ostensible authority, or the company later ratified the deal. Ostensible authority exists when the company's own conduct, intentional or careless, led the other side to believe the employee could sign. (Civ. Code, § 2317.) For a multi-year contract, California generally also requires the employee's authority to be in writing. (Civ. Code, § 2309.) Kolmogorov Law, P.C. litigates authority disputes for businesses in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss a contract your company did not approve, or a counterparty that is disowning its signer.

Actual authority, apparent authority, and ratification

An employee or partner who signs for a business signs as its agent, and agency law decides whether the signature counts. Authority can be given in advance or supplied afterward by ratification. (Civ. Code, § 2307.)

Actual authority is what the company intentionally gave, or carelessly allowed the employee to believe she had. (Civ. Code, § 2316.) It includes whatever is necessary, or proper and usual, in the ordinary course of business to do the job. (Civ. Code, § 2319.) An office manager hired to run the office probably has actual authority to order supplies. A three-year commitment is a harder question.

Ostensible authority, which most people call apparent authority, takes the other side's view. The vendor's belief must trace to the company's conduct. An employee's own statement that she is authorized is not enough by itself. And the company is bound only to those who, in good faith and without want of ordinary care, incurred a liability or parted with value in reliance on it. (Civ. Code, § 2334.)

Ratification comes after the fact. Where oral authority would have sufficed, a company ratifies by accepting or retaining the benefit of the act with notice of it. (Civ. Code, § 2310.) Paying the invoices for six months is the usual example.

What courts look at when an employee signs

I start with four facts.

The title and role the company gave the signer, and what people in that role usually sign.
Whether the same person signed earlier contracts with this vendor that the company honored.
The size and length of the deal compared with the signer's job.
Whether the vendor knew of a spending limit or an approval requirement.

Internal limits matter less than owners expect. An agent whose authority has been restricted still has it ostensibly, except as to persons with actual or constructive notice of the restriction. (Civ. Code, § 2318.) A signing policy the vendor never heard of rarely helps.

One more rule favors owners, and vendors overlook it. If the contract is a kind the law requires to be in writing, the agent's authority must be in writing too. (Civ. Code, § 2309.) An agreement that by its terms cannot be performed within a year is one of those contracts. (Civ. Code, § 1624, subd. (a)(1).) So an office manager with no written authority may be unable to bind the company to a fixed three-year term, and a ratification has to take the same written form. Courts have recognized exceptions, including for a corporation's executive officers and for a company that misleads the vendor or knowingly keeps the benefits. Our page on the statute of frauds lists the contracts that must be written.

Who can sign for a corporation, an LLC, or a partnership

For a corporation, a contract signed by two officers, one from each of two groups, is not invalidated by their lack of authority unless the other party actually knew they lacked it. The first group is the chairperson of the board, the president, or any vice president. The second is the secretary, an assistant secretary, the chief financial officer, or an assistant treasurer. (Corp. Code, § 313.)

For an LLC, read the articles of organization. Unless they say the company is manager-managed, every member is an agent for its usual business. If they do, members acting only as members cannot bind the company, and managers can. (Corp. Code, § 17703.01, subds. (a), (b).) A written contract signed by two managers, or by the sole manager where the articles state there is only one, gets protection like the corporate rule. (Corp. Code, § 17703.01, subd. (d).)

For a general partnership, each partner is an agent for the partnership's business. A partner's act in the apparent ordinary course binds the partnership unless the partner lacked authority and the other side knew or had been notified. Acts outside the ordinary course bind it only if the other partners authorized them. (Corp. Code, § 16301.)

If you are the owner who never approved the contract

Move quickly, because delay looks like approval. Send the vendor written notice that the signer had no authority and that the company does not accept the contract. Stop using the service or product if you can, and offer to return what was delivered. Avoid paying invoices under the contract while you sort it out, or pay only with a written reservation.

If the company has used the service for months, the realistic goal may be a negotiated exit instead of a ruling that no contract exists.

If you are the vendor told the signer had no authority

You have three arguments, usually pleaded together. The signer had actual authority for a contract of this kind. The company's conduct gave the signer ostensible authority, and you gave value in reasonable reliance on it. Or the company ratified by taking the benefit. CACI No. 3709 is the jury instruction on ostensible agency.

Fallbacks exist. If the company kept what you delivered, a claim for its reasonable value may lie even without a binding contract, as our page on quantum meruit explains. A person who assumes to act as an agent also warrants that he has the authority he assumes. (Civ. Code, § 2342.) One who signs a written contract in a principal's name without a good faith belief in his authority can be personally responsible. (Civ. Code, § 2343.)

The better protection comes at signing. Ask for the signer's title, get two officer signatures from a corporation on a large deal, and include a representation of authority.

What to bring to the first meeting

The contract with its signature page, and any earlier contracts with the same vendor.
The signer's job description, offer letter, and any written spending or signing policy.
Invoices, payments, and delivery records under the contract.
Emails or texts showing when the owners learned of the deal and what they did next.

Frequently asked questions

My office manager signed a three-year service contract without asking me. Is my company bound by it in California?

Possibly. The company is bound if the office manager had actual authority for that kind of commitment, or if the company's own conduct led the vendor to reasonably believe she did. Because a three-year term usually must be in writing, California generally requires her authority to be in writing too, which helps the company. Knowingly keeping the benefits can undercut that defense, so disclaim the contract promptly and in writing.

What is apparent authority in California?

California statutes call it ostensible authority. It is the authority a principal, intentionally or through lack of ordinary care, causes or allows a third person to believe an agent has. The third party must have incurred a liability or parted with value in reliance on it, in good faith and with ordinary care. The agent's own claims of authority, standing alone, do not create it.

Who can sign a contract for an LLC in California?

In a member-managed LLC, any member can generally bind the company in its usual business. In a manager-managed LLC, managers can and members acting only as members cannot. California law also protects a counterparty who gets the signatures of two managers, or of the only manager named in the articles, unless the counterparty actually knew the signers lacked authority.

A salesperson for our supplier promised terms in writing and now the supplier says he had no authority to agree to them. Can we hold the supplier to the deal?

Often, yes. In California a company is bound by an agent's ostensible authority to those who, in good faith and without carelessness, took on a liability or gave value in reliance on it. If the supplier gave the salesperson the title, the order forms, and the freedom to negotiate, and honored similar terms before, a court may find authority.

Does paying an invoice ratify a contract an employee signed without permission?

It can. Under California law, where oral authority would have been enough, a principal may ratify an unauthorized act by accepting or retaining its benefit with notice of the act. A payment made before the owners knew of the contract is weaker evidence than payments made after. If you must pay to keep operations running, state in writing that payment is not approval of the contract.

Talk to a California breach of contract attorney

If your company is being held to a contract it never approved, or a counterparty is disowning its own signer, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract, the company's conduct, and the court.