Cannabis contracts are - in the simplest sense - binding agreements between two parties. But how you get to something being "binding" can be complicated. And in the cannabis industry, where things move a mile a second and people often overlook basic contract requirements, the results can be disastrous. Today I want to focus on a concept known as "authority" and explain why I think it is so critical for the cannabis industry.
¿Qué hay que saber sobre la competencia en los contratos relacionados con el cannabis?
When an individual who is (a) an adult, (b) not under duress, and (c) of sound mind enters into a contract, there is almost no question it is binding. [Yes, we are talking about cannabis contracts and federal illegality is an issue, but let's put that to the side for a second.]
But what about contracts with entities as parties? While you've probably heard of things like corporate personhood, and seen contract definitions of "person" to include entities, in reality entities are legal creations and cannot physically sign contracts or do anything else. Companies act through employees or other authorized people, commonly referred to as "agents."
The thing about agents is that they need to be authorized to take certain actions on behalf of a company. If they are not so authorized, then they have no legal ability to bind the company and their signature on a contract is not binding -- with some key "catches" that I discuss below.
¿Cómo obtiene un agente la autorización?
Existen varias formas en las que se otorga a los representantes la facultad de actuar en nombre de una empresa. A los directivos de una sociedad anónima les otorgan esa facultad los accionistas a través de documentos constitutivos, como los estatutos sociales. Un presidente o director general, por ejemplo, suele tener amplias facultades para firmar contratos en nombre de la empresa. A otras personas, como los empleados o los contratistas, se les otorga esa facultad (si es que se les concede) en sus contratos de trabajo u otros acuerdos.
Generally, the lower one gets on the corporate hierarchy, the less authority one has. A person working in procurement may be given authority to execute purchase agreements, but not to enter into a merger agreement. So a good employment agreement will clearly limit an employee or agent's actual authority.
Incluso los directores generales y los presidentes suelen tener limitaciones en cuanto a lo que pueden hacer. Por ejemplo, es posible que los accionistas o los consejeros de una empresa no quieran que un director general compre Lamborghinis con fondos de la empresa, por lo que pueden exigir que el director general obtenga el consentimiento de los accionistas o de los consejeros antes de realizar compras por un importe superior a X dólares. Los accionistas pueden incluso imponer restricciones adicionales al consejo de administración, de modo que exista una jerarquía de consentimientos que deben obtenerse antes de que el director general esté autorizado a firmar uno o (por lo general) varios tipos de contratos.
What about "apparent" authority
Where the rubber can often hit the road is when a company's employee or agent enters into a transaction for which they had no authority. For example, say the CEO of a company enters into a purchase contract for a distribution van costing $75,000, but the company's governing agreements required board approval for purchases over $50,000. Say the CEO didn't get board approval and the board wants to unwind the transaction. The van's seller understandably won't want to unwind the transaction and litigation will probably ensue.
So who wins in these cases? The answer depends on a concept known as "apparent authority," where a third party reasonably (the key word) infers that the person is an authorized agent of the entity they are trying to bind. In the example given above, the van seller will argue it inferred that the CEO of the company had authority to buy a van. And the seller will argue that its inference was reasonable since CEOs are the highest corporate officers and generally have such authority. And unless the seller had knowledge of the CEO's restriction in the company's governing documents -- which, for private companies, are not public records -- he'll have a pretty good chance of prevailing.
The policy behind apparent authority is self-evident. We don't want a system where a transacting party with no reason to believe the other signor lacked authority to suddenly be forced to unwind transactions.
¿Qué pueden hacer las empresas para evitar problemas relacionados con la autoridad aparente?
Both sides of a transaction can take steps to avoid the issues mentioned above. A company can make sure that its agents are fully aware of an understand the limits on their authority. This of course won't completely eliminate the risks when it comes to high-level officers, but it will at least help.
Por otra parte, la otra parte del contrato puede:
- Verify that the person signing for the company is who they claim to be - some corporate officers will be listed on the state's secretary of state database;
- Incluya en el contrato una declaración de que la persona está autorizada y asegúrese de que su cargo quede claramente identificado;
- In bigger transactions, request the company's governing documents and/or a resolution from the board of directors allowing the signor to sign; and
- Negarse a firmar un contrato con alguien que no parezca estar autorizado, dependiendo de las circunstancias. En relación con este último punto, una empresa que desee adquirir un negocio querrá asegurarse, por ejemplo, de que la persona que firma sea el director general, el presidente o un cargo similar, y no un empleado del departamento de correo.
Ninguna de estas cuestiones es inamovible, pero pueden ayudar a evitar problemas más adelante.
¿Y qué hay de la ratificación?
To address one last point, what happens if someone without authority signs a contract on behalf of a company, and the company wants to remain "in" the contract despite the signor's lack of authority? In that case, the company's board of directors, shareholders, or other persons with authority can "ratify" the agreement. This is usually done via a written resolution or at a meeting.
You might be asking whether this is strictly necessary or just overkill - i.e., why can't the company just leave things where they stand and move forward without yet another piece of paper? Proper ratification is a critical step in the corporate governance process, and can avoid a lot of pitfalls down the road. Ratification also helps to clarify what the signing employee or agent can and can't do, and to reinforce the limits of their authority.
Conclusión
Incluso algo tan sencillo como decidir quién debe firmar un contrato en nombre de una empresa puede resultar extremadamente complicado. Sin embargo, analizar estas cuestiones con espíritu crítico puede evitar gastos, pérdidas de tiempo e incluso litigios.
