Excuse Me . . . What New Contractor?

As a responsible board member, each of you know, at all times which contractors were hired, that all contracts have been reviewed by the entire board and voted on in a proper manner. Right? But what happens when a board member, meaning well or not, enters into a contract without the knowledge or consent of a quorum of the board? Is the Association bound by the contract? Unfortunately, the answer to those questions is not as clear-cut as it might seem to be.

A careful look at your governing documents will be in order if you find your association in this type of quandary. The documents will dictate who has the ability to enter into contracts for the Association. Where your situation can get sticky is if it is the president who signs the contract on behalf of the association. The documents, most likely the Bylaws, will give you the information you are looking for. Most Bylaws do not grant this type of power to one person. The President can usually only act on behalf of the Board upon a vote of the board. However, it is important to double-check your minutes to make sure that the power to enter the contract was not authorized at some point. In most situations, the board member would have acted beyond the scope of their authority. So end of story, the contract is void right? Well, not so fast.

Did the person who entered into the contract have apparent authority to do so? In other words, did the contractor believe that the board member had authority to enter into the agreement?

The outcome of this type of situation will be based largely on the individual facts of each contract (negotiation, presumed authority, etc.), and we encourage you to contact us if you find your association in this type of dilemma. It will be important for the rest of the board to make sure that you do not inadvertently ratify the action of the board member wrongfully entering into the contract by either allowing the contract to proceed without intervention, or failing to take any action.

It will be important to gather as much information as possible so that we can help you determine if you will be bound by the contract or if there is a way to properly release the association from the contract.

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