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Michelle
Michelle, Paralegal
Category: Legal
Satisfied Customers: 211
Experience:  Experienced Legal Assistant with knowledge in Criminal, Family, Probate, and Bankruptcy Law.
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Is a contract in a nonexistent company name valid

Resolved Question:

At one time our company advertized with AT&T yellowpages using a name other than our real company name. Would their contract still be inforceable?
Their was no personal guarantee signed, but the person that signed the contract is still employeed.
Submitted: 9 years ago.
Category: Legal
Expert:  Michelle replied 9 years ago.

The person who signed the contract can legally be held responsible for this contract.

I actually have a copy of an AT&T Yellow Pages contract in my possession which states in part:

"By my signature below, I warrant that I have received a copy of and have read this advertising contract, including the terms and conditions, and that I have full authority to sign for and bind customer"

Please let me know if you need additional information, I'll be happy to help!

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Thanks and have a great day,

Michelle

 

Customer: replied 9 years ago.
Reply to Michelle's Post: Your answer doesn't exact answer weather the company would still be libal. The contract statement "I have full authority to sign for and bind customer" is the questionable part in that the "customer" isn't a real entity.
Expert:  Michelle replied 9 years ago.

The customer, if effectively the person who signed the contract. If AT & T were to take legal action, it would be against the signer, doing business as the company.

Thanks, Michelle

Customer: replied 9 years ago.
Sorry, but I must not be making myself very clear. My real question is; if a contract is in the name of company ABC, would company XYZ still be libel? Assuming company ACB doesn't exist or went out of business would company XYZ still be obligated?
Expert:  Michelle replied 9 years ago.

Yes, the company would still be obligated. If this was not a corporation, the creditor can pursue the individual, doing business as company 'XYZ'.

In a sole proprietorship, the individual owner and the company are one in the same. This means that if someone sues the business, then the personal assets of the owner-car, home, etc.-are fair game in any judgment against the company.

If company XYZ was incorporated, the company, and it's shareholders, can be held responsible for the debt, however

The most common way that a shareholder becomes liable for the corporation's debts is by guaranteeing the debt. That guarantee is a contractual agreement that makes the guarantor personally liable to the corporation's creditor on that debt.

Sometimes that liability may arise by the mistake of the shareholder, who signs a contract or lease for the corporation in his own name, rather than in his capacity as an officer or employee of the corporation. Under state law, signing as "John Shareholder" may make John personally liable. The correct way to execute a document for a corporation is by signing "John Shareholder, President, Smallcorp, Inc."

So basically, the debt isn't going to go away just because the business is no longer operating.

That is why I stated earlier, that the person that actually signed the contract can be held responsible, regardless of the company name on the contract.

The contract is still valid, as is the debt.

 

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