If Company Changes Name Contract Valid
Business owners should first understand contract law, and the requirements for entering into contracts with other parties.3 min read
Updated October 14, 2020:
If a company changes its name, a contract will still be valid. However, before we can discuss the validity of a contract after a company changes its name, business owners should first understand contract law, and the requirements for entering into contracts with other parties.
A Contract Overview
A contract is a legally binding agreement entered into between two or more parties. Therefore, after signing the contract, the parties must abide by the terms and provisions in the contract. Otherwise, the party will be in breach, and the non-breaching party can bring a breach of contract claim against the breaching party.
A contract is enforceable only if certain requirements are met. These include:
- Legal Capacity
- Mutual Assent
One party must make an offer to another party. Thereafter, the party receiving the offer must accept the offer in its original state without modifying it in any way. Once the offer and acceptance have been met, the parties must offer some sort of consideration to one another. The concept of consideration is quite simple; the parties must exchange something whether it be something of monetary value or a mere promise to do what is identified in the contract. The parties in the contract must confirm that they are both legally capable of entering into the contract. Therefore, the parties must be at least 18 years of age, mentally competent, and not under the influence of drugs or alcohol. Lastly, the parties must have mutual assent, meaning that they both must agree to the terms and provisions in the contract.
However, some circumstances when a party can get out of its contractual obligations include when the company becomes bankrupt or if both parties agree to terminate the contract.
If both parties agree to modify or terminate the contract, they must memorialize it in writing. In fact, there are several possible changes that could occur, including the following:
- Payment terms/schedule
- Ownership changes
- Name changes
- Legal structure of the contract
Name Changes During Contract Duration
When a company changes its name while the contract is in effect, the parties will want to ensure that they modify the terms. Some contracts might already include terms in the contract, which identify what happens if a company changes its name. For those contracts not including such language, it is important for the parties to immediately modify the contract to identify the change in name.
But, if the parties don’t immediately modify the contract, does that mean the contract will be void and unenforceable? No. An example of this might be if a homeowner contracts with an electrical company to do work around the home. If the electrical company changes its name while the work is being done on the home, this doesn’t mean that the change in name will void the contract. In fact, both parties could simply agree to continue the contract as is, without modifying the name.
Examples of Name Changes During Contract
However, let’s assume that the electrical company changed its name, and all of a sudden disappeared after taking the money from the client without finishing the work. The company is still under a legal obligation to do the work. If the company doesn’t complete the job, it will be in breach, and the injured homeowner can bring a breach of contract claim against the electrical company.
Some companies engage in this type of fraudulent activity as a way to earn money and consistently change its name to avoid doing the work. This is referred to as a fraudulent construct payment scheme, wherein a company that appears to be legitimate will enter into contracts with clients, collect the money, and change its name without completing the work. When a client attempts to phone or email the representative at the company, he/she cannot get through. The client then finds out that the company wasn’t properly registered in its respective state, and is left with incomplete work after having already made payment to the fraudulent company.
If you need help with company name change contract validity, or changing your company name and amending any ongoing contracts, or if you need to bring a breach of contract claim against a fraudulent company that took payment and failed to complete the services you paid for, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.