What is a contract authority?

In the private sector, someone with contractual authority is authorized to negotiate and sign a contract on behalf of a parent person or company.

A contracting authority is a person or agency authorized to commit funds to a project before those funds are available. With this power, people can sign contracts and start projects with the confidence that resources are on the way. Once the contract is signed, it is a formal obligation and the funds must be produced within the time stipulated in the contract.

When dealing with persons who have contractual authority, it may be advisable to obtain information about the limits of that authority to confirm the validity of the contract.

Government agencies are the most common entities authorized to act with contractual authority. These agencies must be able to carry out their activities before resources are allocated and distributed to address urgent problems or fulfill mandates, and they have the support of the government, securing the resources. They can use past appropriations as a guide to determine how much money will be available, and in addition to committing funds before budgets are approved, they can also exceed promised funding commitments if necessary.

When budgets are developed and approved, agencies submit funding requests with a detailed analysis of how the funding will be used. Agencies may indicate that they have used their contractual authority to commit to funding and that the money will be needed to cover those obligations. They also try to anticipate spending needs so that adequate funds are appropriated when the budget is approved.

See also  What is an accounting entity?

In the private sector, someone with contractual authority is authorized to negotiate and sign a contract on behalf of a parent person or company. As with a government agency preparing a contract, civilians with contractual authority cannot personally produce the funds at the time the contract is negotiated, but because they are acting with legal authority, the contract will be financed. If there is a dispute, it usually involves the scope of the authority. A business might argue, for example, that it has given someone limited contractual authority and is rejecting the negotiated contract because it doesn’t meet its needs, is too expensive, or has other problems.

When negotiating and entering into agreements with persons who have contractual authority, it may be advisable to obtain information about the limits of that authority to confirm the validity of the contract. It should not be assumed that because someone claims to have contractual authority, he really does. In the case of civilians who enter into agreements on behalf of employers or clients, documentation proving such power must be presented.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *