Today's Trends in Credit Regulation

Contract is Valid Even if Debtor’s Signature is Not
By Frank H. Bishop, Jr.

You do deals many times a day and have customers sign loads of documents before you provide them credit. But what happens if a debtor later claims that, for whatever reason, he is not bound by a particular document because his signature was not valid or because he did not sign the document? Is a valid signature required in order to have a binding contract? Not always, as you’ll see.

Horace and Debra Huff bought a 2004 Chrysler Pacifica from CBS Quality Cars, Inc. The retail installment contract documenting the transaction was purchased by Coastal Federal Credit Union. After a few months, the Huffs stopped making payments on the contract, and the vehicle was repossessed. The Huffs sued, alleging that CBS Quality Cars had sent documents to the credit union without their permission and without Horace’s valid signature and that CBS Quality Cars had forged his signature on the documents. The trial court found for CBS Quality Cars and awarded costs and attorney’s fees to the dealership. The Huffs appealed.

The Court of Appeals of North Carolina affirmed the decision of the trial court. The appellate court held that even if Horace had not signed the contract, his and Debra’s conduct validated its contents. The Huffs ratified the terms of the contract and retained the contract’s benefits by accepting the financing, taking possession of the Pacifica, making payments due under the contract, and putting approximately 20,500 miles on the car prior to its repossession. However, the appellate court reversed the award of costs and attorney’s fees to CBS Quality Cars because such an award required an express statutory basis under North Carolina law.

So, in this instance, the court found that even if a signature is invalid or missing, the contract is still binding if it was ratified by the debtor’s conduct. It’s a nice decision to have in your back pocket, just in case, but don’t use this opinion as an excuse to get careless with your paperwork.

You never know when a failure to obtain a proper signature could pose problems.

Huff v. CBS Quality Cars, Inc., 2013 N.C. App. LEXIS 557 (N.C. App. June 4, 2013).

Frank H. Bishop, Jr., is an associate in the Maine office of Hudson Cook, LLP. He can be reached at 207-541-9554 or by email at

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