Binding Signature, or Just an Autograph?

Posted by William J. Piercy on

A recent business dispute that wound its way through the trial and appellate courts in Georgia casts doubt on the notion that a signature automatically binds the signor to the contents of the signed document. In Thompson v. Floyd, George Floyd owned Healthlogic, a back office support company servicing the health care industry. A bank expressed an interest in purchasing Mr. Floyd’s company. Around this time, Mr. Floyd was in negotiations to hire Scott Thompson as Healthlogic’s Chief Financial Officer.

At some point, Floyd advised the bank that Thompson would be the primary point person for Healthlogic in connection with the anticipated deal. Thereafter, Thompson participated heavily in the negotiations and due diligence, even though he had not yet been hired by Healthlogic.

Later, Thompson began working as Healthlogic’s CFO. The next day, Thompson met with Floyd to discuss the specifics of his duties and compensation. After much discussion, Floyd wrote out basic terms of compensation, deal participation and goals on the back of an envelope. He then signed the envelope “George Floyd, CEO”, and gave it to Thompson. Thompson left believing he had a deal. Before and after this meeting, Floyd and Thompson exchanged several emails relating to the anticipated sale of the company, Thompson’s compensation, and related issues.

Months later, the bank purchased Healthlogic for $40,000,000. Thompson demanded a success fee of $300,000. Floyd refused to pay, claiming that he and Thompson had never reached a meeting of the minds.

Thomson filed suit. Floyd argued that no contract was ever formed and the trial court agreed, dismissing the case. Thompson appealed and the Georgia Court of Appeals reversed, finding sufficient questions of fact exist to for a jury to determine whether Floyd and Thompson had a deal. The case was tried before a jury in November, 2011.

At trial, Thompson introduced the envelope and argued that it memorialized his deal with Floyd. He pointed to Floyd’s signature as evidence of a binding contract. Floyd countered that the envelope was merely one of many communications in a drawn out negotiation, and introduced several emails that – Floyd argued – showed that negotiations remained ongoing and that no deal was ever reached. Ultimately, the jury rejected Thompson’s claim and sided with Floyd.

What can we learn from this? While a signature can be evidence of an intent to be bound by the terms of a contract, a signature in itself is not enough. There must be an acceptance of those precise terms by another party to create an enforceable contract. Without a meeting of the minds, a signature’s just an autograph.