What is a contractual authority?

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

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

When dealing with people 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 need to be able to conduct their business before resources have been appropriated and distributed to address urgent issues or to fulfill mandates, and they are supported by the government, securing the resources. They can use past allocations as a guide to determining how much money will be made available, and in addition to committing funds before budgets are approved, they can also exceed promised funding commitments if necessary.

When budgets are being developed and approved, agencies submit funding requests with 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 appropriate when the budget is approved.

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In the private sector, someone with contractual authority is authorized to negotiate and sign a contract on behalf of a person or parent company. As with a government agency that prepares 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 authority. A company might argue, for example, that it has given someone limited contractual authority and that it rejects the negotiated contract because it does not 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 make agreements on behalf of employers or clients, documentation must be presented to prove that authority.

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