The capacity in which a person signs a contract matters. The Georgia Court of Appeals recently reaffirmed this long-standing principle in the case of Courtland Hotel, LLC v. Salzer.
In Salzer, the plaintiff hotel sued an event planner after the company he represented cancelled a “My Little Pony” fan convention (uh, no comment on that). The event planner represented a company named “Convention Organizing and Leadership Team, Inc.” He signed the hotel booking contract as the “Meeting Coordinator/Acting Chairman” of “C.O.L.T., Inc.” The hotel sued the event planner, seeking to hold him personally liable for breach of contract because, it argued, no such entity as “C.O.L.T., Inc.” actually existed.
The trial court disagreed, awarding summary judgment to the event planner. The Georgia Court of Appeals agreed with the trial court, affirming its decision. The appellate court observed that, in Georgia, when an individual “purports to act on behalf of a corporation which [does] in fact exist, the fact that the corporation’s name [is] incorrectly set forth in the contract will not necessarily result in the imposition of personal liability against him.” Since, in Salzer, the acronym “C.O.L.T., Inc.” was merely “a misnomer that abbreviated the corporation’s full name,” the event planner could not be held personally liable for breaching the contract.
The Salzer decision is consistent with a number of recent cases in which Georgia appellate courts have refused to enforce contracts and/or personal guaranty agreements against individuals who signed the documents in a representative capacity. For example, in one recent case, the Georgia Court of Appeals refused to enforce a personal guaranty against an individual who signed the document on behalf of his company—even though the court recognized that a corporate guaranty of a corporate obligation was essentially meaningless. As that decision stated, Georgia courts will not “save a creditor from the consequences resulting from its failure to carefully inspect the guaranty to ensure that the proper ‘personal capacity’ designations have been made.”
So contracting parties and creditors beware: in Georgia, personal liability will be imposed only when an agreement indicates that the parties intended for an individual to be bound. And that is not the case when an individual signs the agreement in a representative capacity on behalf of a company.