Are we liable if a rogue employee signs a contract in the company’s name?
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Are we liable if a rogue employee signs a contract in the company’s name?

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12.07.2026

An employee in our sales team signed a large supply agreement on behalf of the company without approval, and the other party now says we are bound. We had a rule that only directors could sign contracts above a certain value. Is the company stuck with it?

Site Administration 15.07.2026
reply date: 15.07.2026

It may be. Under the Companies Act 1993, a company is bound by contracts made by a person with actual authority, and also by a person with ostensible authority where the other party reasonably believed they were authorised. Internal restrictions, such as a rule that directors must sign large contracts, generally do not affect a third party who did not know of them, unless the position is otherwise made clear. The key questions are whether you held the employee out as having authority, for example by giving them a title or letting them negotiate similar deals, and whether the counterparty acted in good faith. Act promptly by notifying the counterparty in writing that the employee lacked authority and reserving your position, and then review internal controls. The company may have remedies against the employee.

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