Key Takeaway
New York appellate court reinforces the long-standing rule that corporate officers must sign contracts individually to assume personal liability for business obligations.
Understanding Personal Liability in Corporate Transactions
In the complex world of business law, one fundamental principle often catches individuals off guard: when you act on behalf of a corporation, you’re generally not personally liable for the company’s obligations. This protection, known as the “corporate veil,” is a cornerstone of modern business structure. However, there are specific circumstances where corporate officers and shareholders can become personally responsible for business debts and contracts.
A recent New York appellate decision reinforces this critical distinction, highlighting when and how individual liability can be established in corporate transactions. The case demonstrates why proper contract execution is essential for New York no-fault insurance law practitioners and other business professionals who regularly engage in corporate dealings.
Understanding these liability principles is particularly important in insurance and commercial litigation contexts, where CPLR procedures often determine the outcome of disputes involving corporate entities and their officers.
Jason Tenenbaum’s Analysis:
Yellow Book Sales & Distrib. Co. Inc. v M & J Commodity Brokerage Corp., 2015 NY Slip Op 51652(U)(App. Term 2d Dept. 2015)
Lesson here on individual responsibility
“As the Court of Appeals stated more than 50 years ago: “n modern times most commercial business is done between corporations, everyone in business knows that an individual stockholder or officer is not liable for his corporation’s engagements unless he signs individually, and where individual responsibility is demanded the nearly universal practice is that the officer signs twice — once as [*2]an officer and again as an individual”
Key Takeaway
The “double signature” rule remains a vital protection for corporate officers. To assume personal liability for corporate obligations, an officer must explicitly sign both in their official capacity and as an individual. This decades-old principle continues to govern modern business transactions, emphasizing the importance of careful contract review and execution in corporate dealings.
Common Questions
Frequently Asked Questions
What is New York's no-fault insurance system?
New York's no-fault insurance system requires all drivers to carry Personal Injury Protection (PIP) coverage. This pays for medical expenses and lost wages regardless of who caused the accident, up to policy limits. However, you can only sue for additional damages if you meet the 'serious injury' threshold.
