Published on: January 12, 2016
When signing a document or entering into a contract a trustee can exempt themselves from personal liability by stipulation or agreement. However, a signature as “trustee” or a description of themselves as a “trustee” does NOT constitute such an agreement, and they may be personally signing the contract without knowing it.
When acting in the capacity as a trustee, sign all documents “as trustee but not individually.” It must be the understanding of both the trustee and the other party to the contract that the trustee is signing contract only as a trustee. Massachusetts courts have routinely held that a signature simply as “trustee” is not enough demonstrate this understanding. When using the underlined language after your signature, the mutual understanding is better depicted in the written document.
Massachusetts courts are so strict in the interpretation of the parties’ intent that even if the other party has knowledge the trustee was acting as a trustee, in addition to a signature as “trustee”, it is still not good enough to demonstrate they were aware the trustee was not also signing the agreement personally. This principal has been longstanding in Massachusetts: “[t]here must have been an agreement that [the trustee] should not be liable personally in order to confine the plaintiff to recourse against the trust. Mere knowledge that the [trustee] was acting as trustee would not be enough to bind the plaintiff to an agreement that the [trustee] should not be personally liable.” Larson v. Sylvester, 282 Mass. 352, 359 (1933).
Adding a provision in the actual contract explicitly stating the other party shall only look to the trust’s assets for recourse will help demonstrate this intent even more. “[A] trustee is personally liable on a contract the trustee signs on behalf of a trust unless it is agreed that the party entering the contract with the trustee shall look only to the trust’s assets for payment or damages.” First Eastern Bank, N.A. v. Jones, 413 Mass. 654, 662 (1992).
Even a provision in the trust instrument, stating the trustee shall not be personally liable upon contracts made by them in the administration of the trust, does not of itself shield the trustee from personal liability. Such a provision does not preclude the other party to a contract from holding the trustee personally liable on the contract, so long as the other party did not have knowledge or reason to know of the provision.
At the time a contract or document is signed, the intent of the parties may seem reasonably clear, however, after several years have passed, what is in writing is sometimes the only way to show what everyone was thinking.
For more information regarding this article contact Alex Levine at firstname.lastname@example.org.