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A representative from an office equipment dealer stops by the church office and shows the pastor a "great deal" on a new copy machine. The pastor is impressed, and signs a contract in the amount of $8,000, in his name. He mentions the transaction at a church board meeting a few weeks later. A board member reminds the pastor and board that the church bylaws require any purchase of property valued at more than $5,000 to receive congregational approval in advance. The board concludes that it has no option but to cancel the contract. The pastor calls the dealer to cancel the contract, but the dealer threatens to hold the pastor personally liable on the contract.

Take the quiz first, then check the summary for all the details.

1. A church's bylaws specify that approval by the membership is required for the purchase of real estate. The owner of a home located next to the church informs Pastor Paul that he would be willing to sell his home to the church. Not wanting to lose the opportunity of purchasing the home, Pastor Paul asks the church board to authorize the purchase of the home, and the board agrees. Pastor Paul signs a contract agreeing to purchase the home for a specified price. He is personally liable on the contract if the church does not or cannot honor it.
   True or False
   
   
2. Pastors have "inherent authority" to sign contracts for the purchase of property.
   True or False
   
   
3. Pastor Greg is the pastor of his church, and president of the church corporation. He signs a contract for a new church computer system, believing that he had the legal authority to sign the contract on the basis of his status as pastor and president of the church corporation. In fact, the church bylaws require that such a contract be signed by both the pastor and a church officer. Pastor Greg may be personally liable on this contract if the church cannot or does not honor it.
   True or False
   
   
4. Pastor Lynn is authorized to sign a contract on behalf of her church. She signs the contract as "Pastor Lynn, President," but she fails to disclose the church's name anywhere in the contract. She may be personally liable on this contract.
   True or False
   
   
5. Ministers should sign contracts in a "representative capacity" in order to reduce the risk of personal liability.
   True or False
   
   
6. Before signing a contract, a minister should confirm that the contract was approved or authorized by appropriate church action.
   True or False
   
   
7. Even if a contract is authorized by appropriate church action, this does not necessarily mean that the pastor is legally authorized to sign it.
   True or False
   
   

Pastors who sign contracts on behalf of their church may become personally liable for fulfilling the contract, if the church elects not to honor the contract or if the church is financially unable to do so. This is a very real risk, as the examples in this chapter demonstrate. The good news is that ministers and church officers can avoid this risk by not signing a contract on behalf of their church unless they are certain that (1) the contract has been properly authorized; (2) they are authorized to sign on behalf of the church; (3) the church is clearly identified in the contract as the party to the agreement; and (4) the minister signs in a "representative capacity."

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