Getting the Name Right on the Contract Really Matters
It sounds like the most simple and innocuous thing. Who could mess up the parties’ names on a contract? And, what’s the big deal if the name is not exactly right?
Under Virginia law, it is a bigger issue than you might think. In particular, it is an issue that can rear its head when one or more of the parties is a corporation or limited liability company. Getting the name correct – that is, using the officially-registered corporate name – is necessary, and failure to do so can impact legal rights.In fact, failure to include the correct party names on a contract may result in a court rendering the contract unenforceable by the misstated entity.
For example, in Berglund Chevrolet, Inc. v. Thor Incorporated, the plaintiff, owner of a car sales showroom, sought to recover damages for alleged violations of a construction contract. The owner was Berglund Chevrolet, Inc.; however, the name on the contract was listed as Berglund Automotive Group, which was not the owner’s official name (or even its registered trade name).*
The owner brought suit in its formal/official name, but different from what appeared on the contract. On challenge from the contractor, the Court ruled that the owner could not bring its claim in its official name, as that was not the party that entered into the contract. If the difference in wording is simply a slight transposition or alteration of the correct words then it is more likely to be a misnomer. However, there are many entities that have drastically different “official” names versus what they are called. Using the official name is vitally important.
So, what is a party to a construction contract to do to ensure that it will have the rights it expects?
- Don’t just skip over or ignore the “name” section of contracts. Read and review them carefully so they reflect the official corporate name of your business and that of the other parties.
- Don’t just assume that you know the official corporate names of all the parties with which you are dealing. Look them up on the Virginia State Corporation Commission website to verify. If still in doubt, then ask the other entity. Some businesses are proprietorships or partnerships, and need to be named accordingly.
- Don’t assume that whoever prepared the contract, including any design professional, actually knows the name of the entities involved in the contract. Still verify and double check.
Keep in mind that if you are the party signing the contract and the official corporate name is not used and title identified, then you could become personally liable.
* Disclaimer: Our firm represented the defendant in this litigation. This article is for informational purposes only and is not intended as self-promotion, an advertisement, or a solicitation of business. In this article, we limit our comments to a general discussion of the court’s opinion, and we will not discuss any privileged information or communications. THE RESULTS OBTAINED IN THIS CASE DEPEND UPON A VARIETY OF FACTORS UNIQUE TO THIS CASE. ANY RESULTS OBTAINED IN THIS CASE ARE NOT INDICATIVE OF, DO NOT GUARANTEE, AND DO NOT PREDICT A SIMILAR RESULT IN ANY OTHER CASE.