The Supreme Court (First Civil Division), in the Judgement issued on 9 June 2010, established the doctrine that “the signer of a promissory note is personally bound if he does not include the power of attorney or proxy by which he is acting or at least it contains the rubber stamp with the details of the company on whose behalf he is acting”.
This judgement is based on the lawsuit brought by the holder of a promissory note, where the defendant acted as the drawer, after payment had been denied when it was submitted for payment. The defendant argued his lack of standing to be sued as he was acting as a sole director of a company.
First and Second Instance cases dismissed the challenge as they found that even though the directors are not required to have a power of attorney, they have to mention the capacity in which they are intervening, otherwise they will be personally liable.
Article 9 of the Exchange and Cheques Act seeks to protect the holder of the note who may not be aware of the status of the signer of the document.
Although that article literally establishes that the holders of bills of exchange are entitled to require the signatories to show the power of attorney, it is sufficient to mention the capacity in which they are involved, and should they not do so (either by means of the title of the signatory or at least with the signature of the representative and the stamp of the company on whose behalf they are acting), they are personally liable for the payment pursuant to the principle of good faith and in order to ensure secure commercial trading. The principle is always to protect the holder of the credit.
Regarding the exceptio in personam alleged by the defendant, it only operates between the parties of the causal relationship, i.e. the contract between the two companies, and the defendant cannot resort to it as it comes from an underlying contract in which he did not intervene as an individual.
The Supreme court upheld the above and therefore the breach of the obligation to state the title of the signatory means that the signatory will be personally liable for payment, similar to the case envisaged in Article 10 of the Exchange and Cheque Act when signing as a representative of a person without authority to do so. The Supreme Court Judgement of 5 April 2010 established the doctrine that if the individual signing the promissory note does not state the title of the signatory or make another reference to the fact that he is acting as a representative or director of a company, it does not relieve the latter from their liability as acceptor of the note, unless the signer was not so authorised. Likewise, the person who accepts the note under those conditions is not personally liable but binds the entity that appears as a drawee of the note if he had power or representation of the company. This doctrine (concludes the judgement of 9 April 2010 which is analyzed in this article) does not apply to those cases where it is impossible to deduce from the terms of the note that he is acting as a director of a company as he could have chosen to act on his own behalf, which would go against secure commercial trading.
Therefore, the judgment ends by establishing the doctrine with which we began so that “the signer of a promissory note is personally bound if he does not include the power of attorney or proxy by which he is acting or at least it contains the rubber stamp with the details of the company on whose behalf he is acting”.