CREDIT MANAGEMENT
The Employee Did Not
Have The Authority To
Sign The Contract!
By Wasilwa Miriongi
O
ne of the most common remarks
that I used to come across when
collecting from customers on
their advertising contracts with my former
employer, was “The employee did not have
authority to sign the contract.”
Sometimes I ask myself could it be as a
society we have become accustomed and
complacent with having to read and/
or post warning signs and labels dealing
with everyday applications that should
be second nature to us, I refer to them as
"common sense" situations.
The fact that these postings are required at
all causes one to assume that we have truly
become a society of sheep that cannot
think or perform without being told or
reminded what they should or should not
do along with the ramifications of their
actions. Could also be our nature just to
trust sales persons with contracts without
reading through the dotted lines and
having a clear understanding what we are
committing the company to!
The credit profession is not exempt from
this madness. Although we are required
to post notices at times concerning the
debtors' rights, will we also eventually
suffer the outcome of frivolous lawsuits
and be required to supplement common
sense and post similar dumb warnings?
We hear it all the time: “We are not going to
pay those invoices because the person who
signed the contract didn’t have authority.”
Many go on to say: “It says right in our
authority levels that only a senior officer
or a manager can bind the company to a
contract of such a magnitude.”
This tells us several things: The debtor
does not want to pay; The debtor is aware
of this outstanding debt; There is a good
chance the debtor has the money to pay;
and The debtor either does not know the
law or is pretending to not knowing the
law.
As a debt collection agency specializing in
debt collection, we know the law is on our
side. But, our initial response is not about
the law, but to ask questions to learn more.
We want to know why they don’t want to
pay, because that is the real problem to
solve. In collection, unless the excuses are
addressed or the so called reasons, payments
will obviously delay leading to strain in cash
flow position.
86 MAL33/19 ISSUE
As a debt collection agency specializing in
debt collection, we know the law is on our
side. But, our initial response is not about
the law, but to ask questions to learn more.
We want to know why they don’t want
to pay, because that is the real problem
to solve. In collection, unless the excuses
are addressed or the so called reasons,
payments will obviously delay leading to
strain in cash flow position.
We encounter this situation most
frequently with service contracts. Typically
the debtor signed up for a service of
some type, such as advertising, email list
access, or an information database. The
most frequent explanations we hear as
to why they do not want to pay are: We
never used the service; We did not get any
benefit from the service; The service didn’t
work the way we thought it would; Our
business changed directions and we didn’t
need the service; or Our profits declined
and we just cannot afford it.
Once we hear the explanation, we will
ask a few more probing questions to
fully understand the real issue we need to
resolve. We also make sure to contact the
client regarding the debtor’s actual usage
of the service in case that information will
help us with the debt collection effort.
Then we pivot to the issue of Authority,
the excuse the debtor is trying to hide
behind. Under the law of agency, an Agent
(employee) is able to bind the Principal
(company) in a contractual relationship
with a third party (customer or supplier).
Business could not function efficiently
if purchasing people could not order