After doing business with Dade Institutional Supply on a payment-in-advance basis for some time, Sobell Technology, Inc. sought an open account. Dade sent Sobell its credit application, and Bonnie Robillard, Sobell's office manager, filled it out.

She signed the form "B.A. Robillard, Office Manager" and sent it back to Dade on September 12, 2011. The financial details and references Ms. Robillard provided were those of Sobell Technology, Inc., which she clearly identified as the "applicant" in the appropriate space.

The bank references checked out, and Dade opened an account in Sobell's name. The parties did business routinely for about a year. From time to time, a single Sobell invoice would go past 45 days. Nonetheless Sobell was considered a "good" customer. Then Sobell ran into some financial difficulties. During the first two quarters of 2013, multiple invoices were more than 60 days out, some longer than 90.

If Sobell's account situation gets worse and legal action is necessary, what problems might there be with collection on this account?

The lack of a corporate officer's signature on the credit application may create a problem in enforcing it.

Who can bind a corporate debtor? Sobel's credit application is signed by an office manager, who is neither an officer nor an owner of the corporate account holder. Does her signature suffice?

The answer is that one who signs a contract, known as the signatory, does not have to be an officer in order to bind a corporation to the contract. However, every signatory must have been authorized by the corporation to do so.

Most creditors prefer to obtain the signature of an owner or officer, to reduce the likelihood that the signatory is unauthorized. In fact, common law doctrines in some states provide that officers are automatically authorized to bind the corporation with their signature, unless the creditor has been given notice to the contrary. But the best way for a creditor to be sure that the signatory on a credit application or any other contract is authorized to bind the corporation is to ask for a corporate resolution that states in writing the signatory's authority.

In the absence of actual authority, the signatory still might have apparent authority to bind the corporation to the contract. Though the precise contours of apparent authority vary from state to state, apparent authority generally arises when the conduct of the principal (here the corporation, Sobel) creates a reasonable impression in the third party (here the creditor, Dade) that the agent (the office Manager, Bonnie Robillard) is authorized to act on its behalf.

In this case, Dade has not only provided Robillard with a title, but it has also given her access to all of the necessary - some would say even sensitive - financial information that Robillard needs to fill out a credit application on its behalf. This conduct on the part of Dade, while somewhat subtle, might be enough in most jurisdictions to render Sobell liable for the terms of the account authorization and credit application with Dade. even if Robillard was not formally authorized to sign such an application on Sobell's behalf.

The courts in other states take a slightly different approach to apparent authority, holding that where the particulars of the transaction seem regular and the signatory appears to be acting in the ordinary course of business confided in him, the principal is bound. This is a more relaxed standard that would likely be met by the facts of this case.

The practical circumstances of the parties' commercial relationship might help Dade's legal position. Sobell has benefitted from the terms of the credit arrangement for several years. At worst, the parties are probably in the same position they would be in if no credit agreement had been signed. They have obviously established a course of dealing over the years, one that can be enforced under the Uniform Commercial Code. The particulars of their credit relationship, as it has actually operated, will dictate.

It is important to have a signed contract with any debtor. Sound credit practices dictate obtaining an officer's signature on the credit agreement or application, preferably together with a corporate resolution, as well as personal guaranties. But, all is not lost if the wrong signature (or none at all) is obtained on the credit application. It may be, though, that a bit of legal wrangling will be required to establish the creditor's rights.