Contract Law 101- Part I- The Parties
This is a new fall 2022 series aimed at you, the business owner. It delves into the importance of ensuring that any contract you enter includes certain provisions to help avoid confusion, or worse, costly litigation. It is designed to be helpful, but as with most things, specific questions are bound to arise. If you are a business owner anywhere in Oregon, and specifically the Portland metro area, feel free to contact my office and schedule a consult for more information regarding your specific situation.
The named parties could be the single-most important (and often never thought of) item to to review when establishing the contractual relationship. Why is this? Because the named parties incur all the responsibility for fulfilling their end of the bargain under the contract. Is the party responsible for the contract intended to be a business or an Individual? If an individual, be sure the named party is the full legal name of that individual and that he/she signs at the bottom with that name. If an individual with a DBA, the DBA should be included after writing the owner's full legal name. If a business, the full legal name of the business should be used. Do not allow the other party to use abbreviated or fictitious names for the business. By ensuring this has been done correctly, you will be binding that individual or entity to those obligations while reducing the chances that party might be able to get out of the contract on a technicality.
As an example, if you are contracting with a business with a full legal name of Joe Schmoe Asian Artifacts, LLC., be sure the contract does not name that party as Joe Schmoe Artifacts, or just Joe Schmoe. For a business, one way to check if the correct named party has been included in the contract is to look in the online state database (usually with the Secretary of State) where the company is registered. You will be able to see its' full legal name and match that to the contract.
Just as important, the person signing the contract should be a person that has the legal ability to bind the party to the contract. For an individual, sole proprietorship or DBA, this should be the individual's full legal name. If you are dealing with a partnership, any general partner may have the ability to bind the partnership, especially where the partner is acting in the ordinary course of the partnerships' activities and affairs, but there are exceptions. For a corporation, generally any of the owners, directors, officers or managers would have the ability to bind the corporation, again assuming any of these is acting in the ordinary course of the corporation's activities and affairs. Finally, a person signing on behalf of an LLC or a limited partnership should be a person who is authorized to sign as evidenced by the state registration records of that entity.
Ensuring that you have the proper named parties and the proper person signing the contract can go a long way towards making sure you are contracting with a responsible party who will have the ability to execute and will remain on the hook for the obligations he/she/it has agreed to in the event something doesn't go right. For more information on this or any other aspect of contract law, feel free to contact Intellequity for a low-price consultation.