Agreement Parties: Everything You Need to Know
Agreement parties are entities that have entered a contract with one another and their names/titles must be correctly stated for a contract to be valid.3 min read
2. References to Agreement Parties
3. Adding New Parties to a Contract
4. Affiliated Parties
Updated November 27, 2020:
Identification of Agreement Parties
A common mistake in contract identification clauses is the insufficient identification of the parties involved. For example, the contract may list an individual with a common name such as Robert Smith with no additional identifying information such as a middle name or initial. A company name may not list whether it is a partnership, a corporation, or another type of entity.
Without knowing exactly how to identify and reach the parties to the agreement, the court cannot determine who can attempt to legally enforce this contract.
Individuals should have their full legal name identifying them without a title such as Mr. or Mrs. When identifying professions, you may use an abbreviated title.
Companies and partnerships identified in the agreement should have:
- The full, official name of the company
- The official registered business address
- The registration number of the company
- The state where the company's formation occurred
Sole proprietors should have the following identifying them:
- The full legal name
- The name under which they do business
- The current address
- A unique identifier such as a tax ID
References to Agreement Parties
After the initial identification of each party, referring to them throughout the agreement either with a short form of the company name or with a functional reference such as lender or seller is permissible. It is proper form to use the short name for your own company and the functional reference for the other party. Use the same reference every time throughout the agreement.
The short name is preferable over an acronym or abbreviation unless the company is already commonly referred to by the acronym in question. Short names are easier to understand than functional references; however, the functional reference is most appropriate when:
- The contract in question is a business contract
- The contract uses defined functional reference terms
- The document refers to a single entity, such as a corporate resolution
- The signor's identity is as yet unknown
Omit the definite article when using a functional reference (Seller, not the Seller).
When referring to groups of counterparties, define each one individually, and define each group. This is common with shareholder agreements, which refer to Sellers or the company name and to Purchasers and the other company name. Keep in mind that this type of contract may raise questions about liability.
Adding New Parties to a Contract
A joinder is a contract attachment specifically for the purpose of adding a new party to an agreement. This document is often used when the identities of the parties have not yet been determined, during the signing of the original agreement. This is common with a partnership, operating, and stockholder agreements.
Joinders are also used to subcontract work to a third party. If a contractor can delegate work to a third party, the company hiring the contractor could stipulate in the agreement that any subcontractor must sign a joinder making them subject to the original agreement's terms and conditions. This is known as a joinder provision and it's included in the most appropriate section of the original agreement.
Signed joinders become part of the original agreement and are kept in the official records. A joinder is not technically an amendment to the contract because it does not substantially change its terms. A change to agreement terms requires an official amendment.
Some contracts contain the language "together with its affiliates" after naming a party to an agreement. This is often used to refer to members of the same corporate group in corporate and/or intellectual property agreements. However, adding these affiliates to the contract can raise several legal challenges. For example:
- Are the affiliates considered parties to the agreement?
- If not, what is the point of including them?
- If so, is the signing party authorized to sign on behalf of all the affiliates? If not, who is responsible for the subsequent misrepresentation?
- Which companies are responsible for the contract's performance?
- Are the affiliates considered liable?
- Do they have the necessary assets to take on this liability?
- Will the parent company provide a guarantee?
- Will royalties be paid to every affiliate?
- If a company is no longer an affiliate, is it no longer a party to the agreement?
- What happens if a new company becomes an affiliate?
- What happens if an affiliate breaches the contract?
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