Gordon Ramsay is a world famous Scottish chef and business owner. He’s most known for his British and American “Hell’s Kitchen” TV shows. Ramsay is also infamous for his short temper and habit of yelling at those not performing up to his standards. After a British court handed down a verdict against him totaling about £1.64 million (or about $2.4 million) earlier this year, he had a much better reason to lose his temper than a deflated soufflé.
Ramsay owns a restaurant management business which until 2010 was run by his father-in-law, Christopher Hutcheson, when Ramsay fired him. According to Real Business, late last year the dispute between the two made it to court when Ramsay accused Hutcheson of using an Autopen (a mechanical device which can copy a signature) to sign a 25 year lease for a bar without his authorization in 2007. The lease made Ramsay responsible for £640,000 (or about $953,000) in payments over the term of the agreement.
During the case Ramsay claimed he was unaware the machine was used to sign the deal on the York & Albany pub, which made him personally responsible for the venue. Ramsay authorized the use of the machine for merchandising material, but Hutcheson reportedly went far beyond that and used it to sign legal documents. Ramsay hoped the court would see his signature on the lease as created without his authorization and forged.
Neither the landlord nor the judge saw things Ramsay’s way, leaving him with a legal bill of around £1 million (or about $1.49 million). According to The Independent, Mr. Justice Morgan said in his decision,
Mr. Ramsay may now regret the transaction in relation to the premises. He may particularly regret his involvement as a guarantor…He may consider that Mr. Hutcheson did a bad deal. However, on any finding, he is not able to say that Mr. Hutcheson exceeded his authority in any respect.
If you own a business you are probably a very busy person. You can only do so many things because you only have so much time and energy. You may have reached the point where you’re hired employees to help you run that business so you’ve delegated responsibilities to others.
Delegating to others the authority to legally bind you and/or your business is something you should avoid but if you feel it’s necessary, there needs to be clear rules, policies, checks and balances in your management system to make sure you and your company are protected.
Not only might the person with this authority simply make a bad decision you disagree with in hindsight, but this opens up the possibility of fraud. Bogus contracts with non-existent companies providing imaginary products or services to your company could drain the wealth from your business.
If you have any questions or concerns about how authority is delegated or exercised in your organization, or that someone in your company has acted beyond their authority potentially creating a liability for your firm, contact our office. We can discuss how your company is structured, who is authorized to do what and the applicable laws in your situation.