The Importance of Using Proper Corporate Names

It's not uncommon to see signed quotes, purchase orders or contracts in which the name of one party is incorrect. The error may appear insignificant such as leaving out the last word in the name (Ltd. or Inc.) or sometimes reflects just an operating or trading name instead of the legal name reflected on the Articles of the corporation. What is the risk if that happens?

The Business Names Act (Ontario) mandates that the full corporate name must be set out in all contracts, invoices and purchase orders. The intention behind this legal requirement is to ensure that the public is aware that it is dealing with a corporate entity rather than an individual when making binding commitments. If the proper legal name is reflected on the document then the other party is deemed to know it is dealing with an incorporated entity.

Failing to correctly reflect the proper and full name, could result in a legal argument that the contract is not entered into by a corporation but rather by the individual who signed it. As a result, that individual may well be exposing him or herself to personal liability for the obligations arising under that contract, quote or purchase order.

So be sure to verify the correct corporate name and to use it consistently when entering into any commitments on behalf of a incorporated entity

The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.