It is not rare for companies to try to make the execution of contracts with their clients a faster and simpler process (and consequently, obtain a faster consent).

A quite common, but not less sensitive situation, concerns agreements or contractual instruments executed by persons in charge of the day-to-day activities of the operation, but not necessarily listed as legal representatives of the company.

This article is intended to present a few comments on the legal effectiveness and risks associated with the representativeness of such agents in companies' transactions.

1. Expression of Will

The legal entities' will is expressed through representation, pursuant to the respective articles of organization or incorporation.

Such precept is grounded on the Brazilian case law and also supported by the Code of Civil Procedure - CPC and Civil Code - CC (article 12, VI, of the CPC and article 47 of the CC/02); we must further recall that the powers granted to representatives are initially limited to those required for the performance of their corporate functions.

2. Ideal Procedure for Execution of Contracts

The safest procedure for the execution of transactions between legal entities calls for the required signature of each party's duly appointed legal representative. 

As a rule, representatives are individuals holding the respective powers required to perform such act.

The legal certainty of a transaction formalized by the company requires that the covenants be agreed upon by the individuals with powers to do so and, further, that they act within the limits of their powers.

Moreover, it is not possible to prevent the adverse effects of any attempt to streamline the procedures for execution of contracts.

It is quite common for companies to provide for General Terms and Conditions in a contract (the so-called "T&Cs") to give more celerity to the contract.

By attaching a T&C (which is intended to set forth provisions and rules of a legal nature) instead of negotiating and formalizing a contract, such method may entail a construction that the execution of the respective contract was not bilateral, but rather represented an adhesion contract, which may hamper any future arguments for the full performance of some of the contract provisions, such as for instance, the enforceability of a liability limitation clause or even an arbitration clause.

3. Theory of Appearance

As mentioned above, the recommendation is that, as a rule, only duly appointed representatives execute or enter into contracts that are binding upon the legal entities.

However, it should be pointed out that the lack of powers to perform a certain act may not be in itself a sufficient reason to annul the executed transaction.

The Brazilian case law has both acknowledged the legal effects in apparent situations even where devoid of formalities to protect a third party's good faith and lawful expectation, and accepted the validity of documents executed by employees in the performance of their duties, even if they lack powers of representation, as shown in some decisions by Brazilian labor courts

Further, the manner in which the parties carry out their activities over time may favorably contribute to arguments on the validity of the legal transaction.

Based on the theory of appearance and also under the labor standpoint, it is theoretically possible to support and consider the effectiveness of acts performed by companies' employees, even if they are not granted formal powers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.