Casual Legal: What’s in a name? Contracting with corporations
By Zoë E. Beckett
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider
Contracts are an essential part of a municipality’s day-to-day operations. When the other party to that contract is a business, it is important that a municipality understands whether they are contracting with an individual or a corporate entity.
When contracting with a corporate entity, a municipality should take additional steps to ensure the accuracy of the entity’s legal name prior to accepting the contract.
A corporation has an obligation under the Business Corporations Act (“BCA”) to do business under their legal name as listed at the Registrar. However, ABC INC. may sign a contract as ABC LTD. without realizing they are in contravention of their obligations as set out in the BCA.
Further, a municipality may accept the contract with ABC LTD. without realizing the entity name is properly ABC INC. When this occurs – whether on a contract for services, an insurance certificate, or a bond – a municipality is increasing a risk that can be easily avoided by implementing a clear policy when it comes to contracting with corporate entities.
Although the Supreme Court of Canada has recognized the doctrine of rectification, which allows for the correction of a written agreement when it is clear that the parties made a common mistake, the Supreme Court cautioned that rectification is not and should not be a substitute for due diligence in contracting.
For municipalities, due diligence can be as easy as requiring evidence of the proper legal name of a corporate entity prior to accepting or executing any contracts or insurance documents. This may involve a policy of requiring evidence of the corporation’s good standing, which can be obtained from the Corporate Registry, and has the additional benefit of providing confirmation to the municipality that the corporation is a validly existing and up to date legal entity.
Lastly, it may be helpful for a municipality to note for a corporate entity that recent court decisions have found individuals personally liable when they have failed to execute a contract under the proper legal name, even when the mistake was simply an omission of the legal suffix.
Municipalities are encouraged to seek legal advice if they are concerned a particular contract or bond has been executed under an incorrect legal name.
To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or send an casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or send an riskcontrol [at] abmunis.ca (email) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.
DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.