Rogue Director Decisions – Signing of contracts

February 2024

Contracts approved by the board, including renewals, should be voted on and appear in board meeting minutes.  What happens when there is no record of a contract being approved by the board?

A management contract for nearly $200,000 was never approved by the board yet signed by one condo director.  There is no record of this contract being approved in condo board meeting minutes.

The “indoor management rule” states that no officer of a condominium corporation, including the President, has individual authority to enter into agreements or bind the corporation to contracts.  This authority lies with the Board of Directors which must vote and approve the contract.  Votes are recorded in the meeting minutes.  Once a contract is approved, the President has authority to sign the contract.

The Condo Act states that decisions of the Board of Directors must be taken at a meeting of the Board of Directors and that a quorum has been established.  Contracts cannot be executed without authorization by resolution of the Board.

It is unlikely that a vendor would be aware that a contract was signed without authority.  Absent other facts, such a contract may not be binding on the corporation.