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Corporations Code Reaches Contracts And Conveyances By Foreign Corporations

Corporations Code Section 313 generally provides that in the absence of actual knowledge of lack of authority, a contract executed by a corporation is not invalidated by any lack of authority of the signing officers provided the contract has been signed  by the chairman of the board, the president or any vice president and the secretary, any assistant secretary, the chief financial officer or any assistant treasurer. 

I recently noted that Section 313 doesn't apply to foreign corporations.  See If You’re Relying On The Signature Of Two Officers, You May Want To Think Again.  Nonetheless, the General Corporation Law does provide a rule of more general application.  Section 208(b) provides that a contract or conveyance made in the name of a corporation is binding on the corporation if:

  • It is authorized or ratified by the Board of Directors;
  • It is done within the scope of authority, actual or apparent, conferred by the Board or the agency power of the officer executing the contract or conveyance.

This rule applies regardless of whether the contract is executed or wholly or in part executory.  The only exception in the statute is when the board's authority is limited by law other than the GCL.

Diligent readers of this blog may point out that the statute refers to a "corporation", which the GCL defines as a corporation organized under the GCL or subject to the GCL pursuant to Section 102(a).   Cal. Corp. Code § 162.  However, Section 208(c) provides that that the statute applies to contracts and conveyances made by foreign corporations in this state and to all conveyances by foreign corporations of real property situated in this state.

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