Be careful how you draft resolutions empowering someone to sign

Patrick Bracher from Norton Rose Fulbright.

A resolution in favour of one of three trustees by which he was ‘authorised to sign the necessary documentation’ could not be construed as a general authority to enter into contracts. In the context it was held that this resolution only authorised the purchase of a farm and the authorised signatory was not entitled to enter into other business agreements with the defendant.

Where there are a number of trustees, they can authorise one of them to act on behalf of all trustees (if the trust deed allows it) but the resolution must be clear as to what is authorised.

In Costa NO v Arvum Exports the defendant could not rely on the ostensible authority of the trustee who signed because no representation that he was authorised had been made to the defendant by the other two trustees. The agreements were therefore invalid.

First published by Financial Institutions Legal Snapshot.