The powers to commit a company

March 10th 2016

A company may be committed by its legal representatives (General Director, Manager, etc.), but also by any person who appears to hold such powers: this is the concept of “apparent mandate”.

A ruling of October 6, 2015 of the Cour de Cassation (the French Supreme Civil Court) has just recalled that this apparent mandate may be asserted by the contracting party only if it could lawfully believe in the signatory’s powers.

In this ruling, it was identified that:

(i)     the contracting party had no relations with the company in question,

(ii)    it had not taken the precaution to verify the signatory’s powers,

(iii)   the latter had not alleged to be the holder of a mandate or a delegation,

(iv)   and, finally, that the contracting party, as an “accomplished professional”, could not have been unaware of the rules of company representation.

It was thereby decided that the objection of the signatory’s powers could not be upheld as the circumstances for signing the agreement could not lawfully have made the contracting party believe in the existence of a mandate.

In other words: in business relations, to assert the existence of an apparent mandate, there must have been “proper reasons” for believing so.

Laurent Viénot