Table of contents

Drafting contracts

(f) The contracting parties

Every contract identifies the contracting parties on the first page (or contains a reference on the first page that refers to a schedule where each party is identified). In a European style contract, the parties would be enumerated and numbered; in a U.S. style, the initial block would, by way of one single sentence, name each party. For example:

Weagree B.V., a private limited liability company established under the laws of the Netherlands, registered under number 34315268 at (Gedempt Hamerkanaal 149, 1021 KP) Amsterdam, the Netherlands (the Licensor);
The sections for identifying the contracting parties should state the information which is required under the applicable civil procedural law to be included in a writ of summons. Obviously, this begins with the (complete) party’s name.

Entities with legal personality. Identify each party by the name as it appears in its articles of association and under which it is registered, including the legal form of the entity (e.g. B.V., GmbH, SA, SpA, Inc., Ltd.) and the jurisdiction of incorporation. Although this would not be a must, many drafters prefer to identify the legal form in its original language (in which case it would be printed in italics), either in addition to the translation in the contract language or without such translation. Many drafters will also include the incorporation number or registration number (in several jurisdictions, these are two different numbers). It is nonsense to state that the company is “duly incorporated”, because it either is incorporated or not. If a legal entity is not yet incorporated, European member states require that the entity name so states (“in formation”) in addition to the anticipated entity form. In such case, member state law will (formally or effectively) treat the entity-in-formation as a partnership.

Partnerships. If a party is a partnership it is important to know pursuant to which law it is established (i.e. to which the partnership agreement is subjected or, but not necessarily, where it has a registered office). Consider also including the name and title of each (general) partner, or at least of those who execute the agreement.

Individuals. If a party is an individual use his or her full name, and consider including his or her date and place of birth.

What do you need? The parties block should contain such information as is necessary to establish where each party has its registered office or address (or, in case of individuals, where they live or have a residence). If that information can be traced on the basis of the name of a town or country only, then such information would suffice (as a minimum). Note that the criteria to be satisfied are those under the applicable civil procedural law (or, in international cases, those of a relevant treaty or convention on the service abroad of judicial documents).
In jurisdictions where the applicable company law would be determined by reference to the ‘real seat’ or (principal) ‘place of business’, the address of the (registered) offices could be inserted. Identify the company’s registered (headquarter) offices if this is different from the address in the notices clause. If a notice clause is omitted, the addresses should be included in the contract parties section.

Registered ‘official’ address. Knowing the applicable law enables the counterparty to verify whether the signatories are duly authorised, by checking their being registered in the public register (or court’s office, depending on the country) and identifying any internal approval requirements (if any) in the articles of association, to make sure that the party-entity is duly represented. Such verification makes sense in European jurisdictions, where the public company or trade registers are reliable sources for such information; in the U.S., such verification would hardly make any sense (which explains in part why parties are often required to provide legal opinions on existence and authority and why a contract would contain various statements expressing the same).
The names of the signatories should be printed in bold and may be capitalised. In the event that a party has changed or anticipates changing its name, it may be helpful to include the past or future name, respectively. In several jurisdictions, also identifying the (local) tax number would be somewhat of a prerequisite.
Do not write out the normally abbreviated legal form of the entity and do not confuse matters by starting the parties block with less relevant information than the entity name, such as in:

The private limited liability company (besloten vennootschap met beperkte aansprakelijkheidWeagree, incorporated under the laws of the Netherlands, with its registered offices at … (Licensor); and

Such wordy phrases may be ‘desirable’ in notarial deeds, but are greatly exaggerated in other agreements.

Representative statements. Sometimes parties prefer to add statements such as represented by its duly authorised managing director to emphasise specifically that the party is duly organized and validly existing. There is no need to include such statements. Such matters are adequately provided for under the applicable law on how a company or principal is represented, as well as what happens if this were not the case.
Such statements are more appropriate to be listed as a warranty. A statement that the contract is binding upon the parties and that the contract restates their agreement is by definition not true and otherwise without meaning: a contract is by definition an incomplete reflection of the parties’ agreement and to the extent that the parties’ consent embodies a broader understanding, they would be free to submit evidence supporting that broader understanding (although the scope is limited under common law by the Parol evidence rule[15]). If it is important to exclude promises made in any preceding letters of intent, such documents should be identified and preferably be excluded specifically (see entire agreement clauses).

Business groups or units. It is nonsense to include a statement that the agreement relates to a certain business group or business unit of the contracting entity. Such groupings have no legal capacity to enter into a contract or the statement is superfluous. If you would like to limit the scope of the agreement express this in the relevant contract provision (e.g. in the first section on scope and authority to submit or accept purchase orders or in an assignment clause restricting transferability of the contract). The effect will probably be negligible in the event of a dispute, since a claimant will not be precluded from being granted rights over assets of other business groups or business units of the same legal entity.

“Also on behalf of Affiliates”. Equally undesirable is a statement in the parties clause that the party also acts on behalf of its Affiliates. Firstly, the same would also need to be reflected in the signature blocks (and there, the affiliates need to be duly represented). Secondly, it is questionable whether it is desirable from a liability-limiting perspective. Thirdly, it is ambiguous because the precise scope and meaning is unclear: it would be much more accurate (and adequate) to stipulate a provision to be for the benefit of an affiliate where relevant. Fourthly, if the reference were to be interpreted narrowly, the surrounding facts will probably be more convincing than the mere statement (in other words, if an affiliate would submit purchase orders or otherwise act vis-à-vis the other party, that would diminish the rather arbitrary boilerplate wording in the parties clause).

Share on twitter
Share on linkedin
Share on reddit
Share on email

Terms of Use

I hereby accept (or reconfirm my acceptance of) Weagree’ Terms of use, in which:

Terms of Use

I hereby accept (or reconfirm my acceptance of) Weagree’ Terms of use, in which: