The Iowa Court of Appeals opinion in Builders Kitchen and Supply Co. v. Moyer, N0. 0-655/09-0194 (September 2, 2009) is a deceptively simple case. On the one hand it represents the folly of not having even run of the mill contracts reviewed by lawyers before they are signed. And on the other hand, it is a warning to lawyers that things aren't as simple as they appear.
Frank Moyer signed a contract with Builders Kitchen for the purchase and installation of some kitchen cabinets and countertops. The contract was just two pages long. On the first page there was a place for the name of the business and a little later a space to indicate the type of entity. Moyer filled in the name of his business, Crystal Creek Development, but neglected to indicate that it was a corporation. He signed the contract as "Frank Moyer, Pres." The second signature line, presumably for the guarantor, was left blank.
Unfortunately for Moyer the contract contained a clause that said "I hereby personally guarantee to pay on demand any and all sums due that my/our company shall fail to pay." Of course, I wouldn't be writing this post if Crystal Creek Development had paid the amount due.
Because it didn't Builders Kitchen sued the company and Moyer personally. The district court found Moyer to be personally liable and the Court of Appeals affirmed finding that Moyer's signature was both in his representative capacity and personally. To find otherwise, both courts said, would negate the language of the contract.
This raises some interesting questions. First, is this also true if a document is signed as ABC, Inc. by John Doe, President and the other signature line for the guarantor is left blank? What if a lower level officer, not the owner of the company, had signed the contract? Would that poor son of a gun be personally liable? Does this mean that signatories to contracts are also parties to the contracts, unless "party" is defined to exclude the signatories? (thus, references to "the parties agree/represent/warrant/ etc." now bind the individuals signing the contract?) And how does this ruling jive with Iowa Code 554.3402(2) which says:
2. If a representative signs the name of the representative to an
instrument and the signature is an authorized signature of the
represented person, the following rules apply:
a. If the form of the signature shows unambiguously that the
signature is made on behalf of the represented person who is
identified in the instrument, the representative is not liable on the
Maybe this case is not so simple after all.