Can You Be Personally Responsible When You Sign A Contract As President Of A Corporation?

Ordinarily, the answer is no.  However, you must carefully read contract terms before assuming you will not be personally liable for company debts.  The Connecticut Supreme Court recently addressed an example where the terms of the contract created personally liability for the president of a company.  Yellow Book decisionThe case is Yellow Book Sales v. Valle.  images(3)[1]

When a corporation is the primary party to and signer of a contract, and the signature is by an officer of the corporation, the generally held rule is that the corporation is responsible and not the individual officer.  This is a rule of construction or interpretation for contracts.  Generally, this rule will apply if the contract is between a corporation and another party, and there is no indication of personal liability in the terms of the contract or on the signature line.  

However, there are circumstances where the general rule does not apply.  In Yellow Book, the Supreme Court of Connecticut found that there were terms in the contract clearly indicating an intent to bind the individual signer as well as the company.  In this particular case, the president of the company signed his name and added the terms "president" to his signature.  Adding the term "president" did not prevent personal liability in this case because the contract terms were clear that there was a personal obligation.

The language in the contract read "[t]he signer of this agreement does, by his execution personally and individually undertake and assume full performance . . ."  As such, it was not ambiguous to the court when the signer added the term "president."  Instead, the court found that the contract, by its clear terms, bound the the signer as an individual and the company.  When the company ceased operations, the president was stuck with the obligation.  

If you want to avoid personal liability for corporate debts, make sure you  read the contract terms closely and not only the signature line.  The signature line may not govern the outcome. The terms of the contract, the party to the contract, and the signature should only be on behalf of the corporate entity.   If there is any confusion based on the terms of the contract, seek legal counsel.