Contracts Series: Naming the Right Parties
For the first in our series of articles on the essential features of a contract we will be starting at the beginning: with naming the right parties. Every contract will have a heading that sets out the parties and their addresses. Generally it will look something like this:
ACME INC. a company duly incorporated under the laws of British Columbia,
with a registered office at 1234 Smithe St., Vancouver BC, V6G 1G2
JOHN SMITH, an individual with an address at 4321 Haro St., Vancouver, BC V6G 1G1
The purpose of this heading is to set out exactly who the parties to the contract are, that is, who is undertaking obligations under the contract. While naming the right parties to a contract may seem like it should be a fairly straightforward process, the potential for errors is always there. There are two key things to be aware of at this stage:
Making Sure the Right Parties Are Named.
It is very important to determine who, legally, you want to contract with. For example, when contracting with an individual who owns a company, you should be certain as to whether you’re intending to contract with the company, the individual owner or both. Each of those three options has significant legal implications and may alter the structure of your contract. If the intended party isn’t named, you may lose any recourse against it if that party fails to live up to its obligations.
Making Sure the Parties are Named Correctly.
Making sure the parties are named correctly is another potential pitfall to keep in mind. Companies often do business under names different from the legal name they are registered under. For example, a company operating as “Acme Consulting” may in fact be incorporated under a different name, such as “John Smith Consulting Solutions (Canada) Inc.,” or as a numbered company (i.e. 543421 BC Ltd.). If you do not list the proper legal name of the party you’re contracting with, you may be unable to enforce your contract against that party. To get this right, you need to do a little due diligence. For instance, you may want to run a corporate search to ensure that the right party is named on your contract.
Making sure the right party is named in a contract is essential. The obligations and rights associated with a contract are only binding against other named parties to the contract. If you misstate or fail to properly identify the legal name of the other party to your contract, your contract may be unenforceable against it.
Naming parties seems straight forward, but this is actually a very common pitfall; and the repercussions can be significant.
Every contract is unique and should reflect the commercial realities of your business. To discuss your contractual arrangements with a business lawyer, contact one of the article’s co-authors: Marius Adomnica or Geoff Dittrich.