Details of the parties block - Weagree

Details of the parties block

There is much to say about which information is needed, redundant or desirable in a parties block, the paragraphs at the beginning of a contract, identifying the contracting parties. This blog is a first attempt to address the details in a parties block. I should be grateful to receive feedback.

The sections for identifying the contracting parties should preferably state the information, which is required under the applicable civil procedural law (i.e., the chosen court jurisdiction or place of arbitration) to be included in a writ of summons. In most jurisdictions this includes the company’s registration number. Consider identifying 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.

Identify each party by the name appearing in the 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. Many drafters will also include the corporate registration or incorporation number. In jurisdictions where the applicable company law would be determined by reference to the ‘real seat’ or (principal) ‘place of business’, the (registered) offices could be inserted as well. 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.

Knowing the applicable law enables the counterparty to verify whether the signatories are duly authorized, 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 US, 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 would be printed in bold; and you may desire to use ‘all capitals’. In the event that a party 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 blur the signalling effect of starting the parties block with less relevant information than the entity name, such as in:

The private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) Weagree, 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.

Representant statements. Sometimes parties prefer to add statements such as represented by its duly authorized managing director, or to emphasize 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. 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 non-sense 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).

Also on behalf of Affiliates. Equally undesirable is a statement in the party 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). Second, it is questionable whether it is desirable from a liability-limiting perspective. Third, it is ambiguous because the precise scope and meaning of it is unclear: it would be much more accurate (and adequate) to stipulate for the benefit of an affiliate in those provisions where it is relevant. Fourth, 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 orders or otherwise act vis-à-vis the other party, that would diminish the rather arbitrary boilerplate wording in the party clause).

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: