The first thing I learnt as a trainee lawyer is that the parties to a contract should be properly and unambiguously identified. I spent the next few years learning that non-lawyers routinely elide this principle – to the benefit of no-one, except lawyers.
Consider the following contractual parties clause.
This agreement is made on XXX between:
- General Trading of 1 The Street, Townton;
- Mr John Doe; and
- Commercial Services Ltd.
This is wrong. Horribly wrong. Nonetheless, commercial lawyers and – especially – litigators see this sort of thing in contracts all the time.
In case you can’t spot all the problems with this, I’ve listed them.
General Trading of 1 The Street, Townton
What is General Trading? If I visit 1 The Street, Townton, will I be able to see it, touch it, serve proceedings on it? It could be the trading name of a sole trader, or perhaps a partnership, or perhaps a company. It could be the name of a company, omitting the Limited or Ltd. We just don’t know.
Mr John Doe
There are a lot of John Does in the world. Which John Doe is this? Is it John A. Doe or John B. Doe? Does he have an address, perhaps, where we could reach him? What about a uniquely identifying code of some kind, a primary key, such as a passport number?
Commercial Services Ltd
This is a little better: E minus rather than complete fail. We know we have a limited company, and we have its name. But we don’t know in which jurisdiction it is incorporated. And we don’t know its registration number. Companies can change names, but they can’t change registration numbers.
If you don’t properly identify the parties to the contract, how will you know who can enforce the contract? How will you know who it can be enforced against?
So, next time you’re thinking of skimping on party information, think again.
For companies and LLPs, identify them using their:
- full legal name;
- registered office address;
- company registration number; and
- country of incorporation.
For sole traders, identify them using:
- their trading name;
- the full name of the individual concerned;
- the current address of the individual concerned; and
- (if you want to push the boat out) some unique identifier, such as a national ID number or passport number.
For smaller partnerships, identify them in the same way as you would a sole trader, but with information about each individual partner. For larger partnerships, you might want to identify one or two representative partners.
Is it normal for the identity of the parties not to be important in the formation of the contract?
I guess the address of a party to a contract is very important. What if it is omitted and the parties have signed? The RC number of a company who is a party to a contract – must it be included in a contract agreement?
When a company undergoes a merger after a contract with another company? Does it need to inform the contracting company?
What if there is a genuine mistake. I.e. in the case where one party is a sole proprietor but is mentioned as a “company” in the Contract by mistake, can this be revoked later or amended in the Contract? Has there been cases like that, if so how did the law interpret such errors? (appreciate if you could assist me with a few case names to read the judgments). Thanks in advance.
I entered into a contract with 2 recommended builders on basis of quote sent using personal email address. 2 months after starting they sent a first invoice, indicating they were a limited company which had never been declared. They directed me to pay by bank transfer which I had to set up, stating the full limited company name. Having done everything wrong I need to claim compensation to rectify but who do I have a contract with? By setting up the payment to the ltd company have I inadvertently accepted that my contract was with a limited company from the beginning or is my contract with the trading company/partnership? Can I justify this by not understanding the legal ramifications of doing so? The limited company has no assets.
You should take proper advice on this from a suitably experience lawyer, as obviously claiming against the wrong party could result in the claim being struck out and/or additional legal costs.
Thank you for your reply. Could you clarify what you mean by “a suitably experienced lawyer”, please? I ask because I have sought legal advice but no-one seems to be sure. My own solicitor said my contract can’t be with the limited company because I was unaware of their existence until 2 months into the contract, but he is also trying to cover himself in case the judge doesn’t agree. How do I know if he is suitably experienced / how do I find someone who does have the right level of experience? Kind regards
It is theoretically possible for a person to contract with another person without knowing the identity of that other person – this is an “undisclosed principal” situation under the law of agency. In choosing a lawyer to help with this, I would be looking for a general commercial litigator, with a good knowledge of the law of agency and the law of contract, and lots of experience conducting civil claims in the County Courts.
Hi All,
I have a question regarding General Partnerships (UK law).
I want to enter into a media contract with a General Partnership. I asked the client for the full name of the partner that will sing on behalf of the partnership and I have also requested any documentation that can prove that the partner has the authority to sign.
The client has given us the partner full name but they also mentioned that they do not have a partnership agreement that can prove his authority.
Can I ask for a copy of his passport and proof of address of the partnership for our own customer due diligence? if not, how can I identify the partner?
Should I also add to the contract other partners?
The Contract defines the parties as
Mr A the “Employer”; and
Company B the “Contractor”
The contract has been signed by Mr A and by Mr B (on behalf of Company B); but also by Mrs A (although not sure why – may have been a misunderstanding).
Is Mrs A a party to the contract? I am being told “no” (because she is not named as a party) but interested in views (given that Mrs A signed the contract).
I’m not sure it would be sensible to comment on this without seeing the document in question and knowing more about the context.
I can say this: the majority of contracts are drafted with two parties in mind, and many contractual provisions will cease to make much sense or will cease to work effectively if additonal parties are added. If that is the case here, it would be a good argument that Mrs A is not a party.
Presumably there is some live issue here, which turns upon whether Mrs A is or is not a party?
Thank you Alasdair for your comment.
Two live issues:
One view being put forward is that Mrs A signed the contract to acknowledge Mr A is the party and the “Employer”; so
I don’t have anything much to add to my comment above, except that: if Mrs A has clearly behaved (or clearly not behaved) as a contracting party, that may be a relevant factor here.
I signed a lease with two individuals, however I am being sued by their trust. Is this a valid suit?
If you are being sued, you should consult a lawyer asap. You are unlikely to get much useful guidance over the internet, even if you provided A LOT more information than is provided above.
Can you name numerous separate companies (all part of the same group) on a single contract rather than raise individual contracts for each company?. Would the companies be individually liable or jointly and severably liable for supplies made under that contract?
Yes, you can.
Most commonly, in my experience, only one of the companies will take on liabilities under the contract, although each group company will be entitled to enforce the contract against the supplier, and the contracting group company may give some form of indemnity in relation to losses caused by the other group companies.
Another relatively common approach is to have a framework agreement with one group company, and then particular orders made under that framework for each other group company. In effect, you create lots of related contracts.
In principle, you can have a contract with 2+ customer parties, but if you do this you will need to amend any contractual clauses that were drafted on the assumption that there would be two contracting parties. For example, does every customer party have a right to terminate the entire contract? Must contractual notices be given to all parties?
In English law can a limited company be both parties to a contract, i.e. both the Employer and the Contractor in a construction main contract?
No – a contract needs at least 2 parties.
I entered into a contract with a company but in the contract, it shows their business name, not the legal entity name. is that contract still vaild?
Assuming the legal person in question can still be identified – as implied by the phrase “entered into a contract with a company” – then yes it probably is still valid under English law.
Hey Guys,
If I have a contract between Party 1 (a company) and Party 2 (a contractor), but I let x (head of a department) initial the pages of the contract.
Is the contract valid?
Is a contract valid if the wrong passport number is on it? My boyfriend and I had an internet contract (in his name with his passport number), and they are saying that we owe them money because we never cancelled it; however, when we called, they couldn’t find any information about the contract in their system (it was a 12-month contract, so we just assumed that, after 12 months, it expired, especially since they no longer had the information in the system). However, since they are now trying to claim more money, we have found out through the debt collection company that they have the incorrect passport number on the contract, which is why they couldn’t find the information when we called. As such, we’re wondering if they even have a legal leg to stand on because the identifying information in the contract is incorrect.
If a third party is named in a contract but had no knowledge of the agreement or of the terms and conditions that imposed obligations on that third party would the contract be enforceable? The third party never signed the contract nor was ever approached to sign.
In English law a contracting party needs to either offer to contract or to accept another’s offer to contract, in order for a contract to be formed.
There are however situations where the actions of another can bind a person to a contract (eg where the other is an agent acting on behalf of that person).
Whether the contract is enforceable is a separate question. For example, it might be enforceable but between two other people.
There are a lot of unknowns here – you would need to speak to a lawyer to get a proper idea of the legal position.
Under “Companies and LLPs” you indicate that the “full legal name” be used along with other qualifying identification factors. Is it OK to use common abbreviations in the “full legal name” without specific punctuation? In your example you use “Ltd” which is an abbreviation for “Limited” so abbreviations, per se, must be OK. However, is there a specific rule that says it must match exactly the way the company’s name appears on a state’s “Secretary of State” site of registered business names? If the company’s name is displayed as “ABC Company L.L.C.” on the SoS site is it allowable to refer to the company without the periods between the “LLC” or must it be shown exactly as “L.L.C.”?
… about English law or US law?
Hi all, I would like to enquire about one thing. In the event a contracting party changes its company registered address during the course of a contract period, would there be any contractual impact due to the change? Would it be deemed as an amendment to contract?
Thanks
… usually have any impact on a contract, unless obligations were specifically linked to the registered office in the contract.
It wouldn’t usually be thought of as an amendment.
Is an agreement involving three parties in any danger of inviting misinterpretation or confusion with respect to the third party if it carries a clause against encouraging “any third party interest”?
If so, then what is the best remedy?
“Third party” is usually used on contracts to refer to a person other than the contracting parties. For this reason, unless there were some countervailing factor (eg third party being a defined term), I would usually treat a reference to a third party in a three-party contracts as being a reference to a non-contracting party. I’d need to review the contract to form a firm view.
If you are worried about misinterpretation, I suggest that you agree with the other parties a letter of amendment.
In such a context, and when an agreement is still being drafted, is it perhaps advisable to use such terms as Party One, Party Two and Party Three, for instance, or some other nomenclature, instead of first party, second party and third party?
Yes, using defined terms to identify each party would be a good idea here.
In case you are unfamiliar with the conventions, these are usually set out either in the parties clause near the start of the document or in a special definitions section. Eg “Party One” means XYZ Ltd, a company incoroporated …”.
If the contract cover specifies A as one of the contracting parties but in the main body specifies B and B’s personal address as a contracting party, is this contract valid or enforceable? Also a contracting party includes two people, do they both need to sign the contract to make it valid? Many thanks.
Regarding your first question, see:
http://www.inhouselawyer.co.uk/index.php/contract/10364-whats-in-a-name-high-court-delivers-ruling-on-availability-of-rectification-for-misnomer-and-mistake-in-liberty-mercian-v-cuddy
Of course, if the contract hasn’t been agreed between the parties, the possibility of mistake/recitifcation does not arise. Usually, a contract would be agreed with signatures, but there are other ways.
I think the only way you will get a clear answer to your question would be to instruct a solicitor to advise, who can then consider all the relevant background information.
It is possible to include a variation clause to a contract which comes into effect at the same time as the contract is signed. This has arisen as the terms of the contract are set but a variation clause allows for change once the contract is legally binding and executed.
If the terms of the contract are set, then how can it be varied?
I’m guessing you mean that there is a contractual document which needs to form part of the contract in unamended form, and the question is whether other parts of the contractual documentation can vary that document. If so, I suppose the answer is “yes”, although I would usually frame this as one part of the documentation disapplying the provisions of another part of the documentation, rather than a variation. You will need to ensure that the part of the documentation doing the disapplying takes precedence over the part being partially disapplied.