Contract Terms 1: The Parties

The Right Entity

One of the basic elements of a contract is to know who you’re dealing with. (No, Who’s on first). If you are representing an LLC or Corporation, make sure the LLC or Corporation is identified as the party to the contract. If you identify yourself as a party, you can become individually liable for the contract. And if you created an LLC or Corporation to limit your individual liability, naming yourself as a party defeats to purpose of doing that.

The Right Name

You might be dealing with an entity with a fictitious name (or “DBA – doing business as” designation). Many sole proprietors operate under a dba. My preference would be to identify the actual entity in addition to the dba. So, for example, if I were a sole proprietor but operated under the dba “The Best Company Ever”, I would identify the party to the contract as “Leland Faux dba The Best Company Ever.” It’s not necessary to do this, after all you are legal entitled to operate under the dba, so it may be more a matter of personal preference. I would not want someone to think I’m a corporate entity if I’m really a sole proprietor because I don’t want that person to think I’m something I’m not.

The Right Licenses

It is also important to ensure that the entity you are dealing with has an active and licensed business. If they are not, they are not authorized to do business. This could jeopardize the stability of your contract. In Nevada, you can check the status of a company through the Secretary of State and you can check licenses in Clark County, Las Vegas, and Henderson. If you’re dealing with a profession such as a contractor, lawyer, doctor, accountant, etc., you’ll want to confirm that they are licensed with their respective board. If they are not, the contract may be unenforceable. I’m not saying that you have to do the legwork to confirm the licensing status of a business each and every time you enter into a contract. But it might be a good idea to check–especially if a contract is going to have a significant impact on your business. These types of checks become even more important if you are buying or selling a business.

What About Your Business?

Surprisingly (or not), it can be easy to overlook some of these issues. If you are a sole proprietor, you may have thought it would be a good idea to call your business by some name, but have never done a fictitious name filing. It never hurts to make sure your ducks are in a row.

Read More on Contracts:

The Anatomy of a Contract
Your Contract has Problems. They all do.
How much will it cost to have your attorney look over your contract?
Contract Terms 1: The Parties – You’re reading this now!
Contract Terms 2: The Recitals
Contract Terms 3: Avoid Hanging Chads
Contract Terms 4: Contract Drafting Hack (kind of)
Contract Terms 5: The Boilerplate
Contract Terms 6: How to Properly Sign a Contract