This article has been written by Pranav Juneja.
Table of Contents
Introduction
The first step while forming a contract is to identify the parties to such contract. A party to a contract may be an individual, company, LLP, partnership firm, trust, sole proprietor etc. The naming of parties is not a one size fits all mechanism. It is different for different sets of parties. Naming a party also helps in identifying the nature of that party. It shall be adequate and correct for the contract to be valid.
Name of the parties shall also include the details of parties.
Whenever the Party to the contract is an individual, or a sole proprietor, or partners of a partnership firm, or trustees of a trust, the details shall include father’s name, permanent address, identification number including PAN, aadhaar, voter id, or driving license etc.
In cases where the contracting party is an LLP or a company, the correct name of the LLP or the company can be ascertained and verified from the registrar of companies. Along with the name of LLP or company, other details shall include LLPIN/CIN, the registered address of LLP/company. Details such as email address, PAN, telephone number may also be mentioned for the purposes of ease.
In cases where the party is a government body, or a society, or a statutory body, the details shall include along with the name of such body or association or council, as the case may be, the details of the person including his name and designation, who has the authority to represent the party.
This is done for precise information about the person or entity such that there is no chance of ambiguity in any situation such as tracing the person, in cases of fraud, misrepresentation, discrepancies, certainty about the authority of that person.
Consequences if the Name is wrong
The name of the parties in the contract shall be mentioned with utmost care and precision. If the name of a party is described incorrectly in the contract, it will render the contract voidable at the option of the aggrieved party. Such a thing will amount to misrepresentation under Section 18 of the Indian Contract Act, 1872.
To take an example, if a person who does not have the authority to contract executes a contract on behalf of a company, the contract will be voidable at the option of the company.
Section 18. Misrepresentation: Misrepresentation means and includes:
- The positive assertion, in a manner, not warranted by the information of the person making it, of that which is not true, though he believes it to be true.
- Any breach of duty which, without any intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading anyone to his prejudice, or to the prejudice of anyone claiming under him.
- causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.
Section 19 of the Indian Contract Act renders the contract caused by misrepresentation voidable.
Section 19. Voidability of Agreements without free consent: When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed and that he shall be put in the position in which he would have been if the representation made had been true.
Exception: If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of Section 17, the contract nevertheless is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
Authority to Contract
It shall be kept in mind that the person who is executing the contract should have the authority to do so. The contract entered into by a person not having the authority shall render the contract voidable at the option of the aggrieved party.
In the case of an individual, the individual himself is the authority.
In the case of a company, the authority can be traced from the articles of association of the company.
In the case of an LLP, the authority can be traced from the LLP agreement.
In the case of a partnership, the authority comprises of all the partners to the partnership agreement.
In the case of a trust, the name of the trustees can be ascertained from the trust deed.
When the Party is a government body, the authority can generally be traced from the laws in force or rules framed under the law or by notifications issued by the state or central government, as the case may be.
When the Party is a society, the authority can generally be found in by-laws of that society.
Name of the Parties to include successors and heirs
After naming the parties, we will always see something written like this ‘which expression unless repugnant to the context or meaning thereof, shall mean and include their successors, heirs, assigns and executors’.
This is to keep the contract enforceable in case of death of the executor or the business taken over by successors or devolved upon heirs etc. This expression does not restrict the contract only to the person who executes it but makes it enforceable with the person who takes charge of such entity with same terms and conditions as mentioned in the contract. The person who is the present in charge will have to abide by all the terms and conditions of the contract. He shall fulfil all the rights and obligations conferred upon him by the contract.
When the Party is an Individual
When the contracting party is an individual, the contract is executed in the complete name of the person who is the party to such a contract. Along with the complete name of the individual, other details shall include the father’s name, aadhaar number, and/or passport number, and/or PAN, and permanent address.
For Example: Mr. Harsh Sharma, son of Mr. Rajat Sharma, having aadhaar number xxxxxxxxxxxx, and PAN xxxxxxxxxx, and residing at 1785/6 Laxmi Nagar, Delhi-110092.
When the Party is a Company
Since a company is a separate legal entity and has its own separate legal existence, the contract is executed in the name of the company itself.
As per Section 9 of the Companies Act, 2013, ‘a company is a separate legal entity and can sue and be sued in its own name.’
According to Section 12 (3) (c) of the Companies Act, 2013 ‘Every company shall get its name, address of its registered office and the corporate identity number along with telephone number, fax number, if any, email and website addresses, if any, printed in all its business letters, billheads, letter papers, and in all its notices, and other official publications.’
Therefore, the name of the party shall include the name of the company, address of its registered office (head-office), corporate identification number (CIN), telephone and/or fax number, if any, email and/or website address, if any. However, one may also include the PAN of the company.
For example: ABC Ltd., a Company within the meaning of Companies Act, 2013, with CIN xxxxxxxxxxxxxxxxxxxxx and PAN xxxxxxxxxx, having its registered office at 24, Block-A, Connaught Place, New Delhi-110001 and email address [email protected].
When the Party is an LLP
An LLP is a body corporate in terms of Section 2(d) of the Limited Liability Partnership Act, 2008.
As per Section 3 (1) of the act, an LLP is a body corporate formed under this act and is a legal entity separate from its partners.
Section 14 of the act states the effect of registration. Section 14 (1) states that on incorporation, an LLP shall by its name be capable of suing and be sued.
Therefore, a contract shall be executed in the name of the LLP itself.
For example, Lawgical LLP, a limited liability partnership within the meaning of Limited Liability Partnership Act, 2008 with LLPIN xxxxxxx and having its registered office at 12, Block-B, Connaught Place, New Delhi-110001.’
When the Party is a Partnership Firm
Since a partnership is not a legal entity but an association of persons as per Section 4 of the Indian Partnership Act, 1932, hence, the contract shall be executed in the name of all the partners along with their details including the father’s name, aadhaar number and permanent address.
For a contract to be enforceable, a partnership firm may be registered or unregistered but for a suit to be instituted in court arising out of such contract, the partnership firm has to be registered under the Indian Partnership Act, 1932.
Section 69 of the Indian Partnership Act, 1932 describes the effect of non-registration.
Section 69. Effect of non-registration:
(1) No suit to enforce a right arising from the contract or conferred by this act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
(2) No suit to enforce a right arising out from a contract shall be instituted in any court by or on behalf of any person against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
For Example: Mr. Anuj Singh, son of Mr. Rajesh Singh, with aadhaar number xxxxxxxxxxxx, residing at House Number 24, Sector 13, Kurukshetra-136118 and Mr. Sunil Kumar, son of Mr. Baldev Kumar, with aadhaar number xxxxxxxxxxxx, residing at House Number 8, Sector 8, Urban Estate, Kurukshetra-136118, carrying on the business of cloth trading under the firm name ‘RadhaKishan Trading’, a registered partnership firm within the meaning of Indian Partnership Act, 1932 having its registered office at Shop Number 118, Cloth Market, Kurukshetra-136118.
When the Party is a Sole Proprietor
If the party is a sole proprietor, the contract is entered and executed in the name of the proprietor himself and not the proprietorship concern.
For Example: Mr. Prithvi Singh, son of Mr. Rajbir Singh, carrying on business as the sole proprietor of ‘Singh Electricals’, with PAN xxxxxxxxxx, residing at 112, Urban Estate, Panipat, Haryana – 132103.
When the Party is a Government
Whenever the party to a contract is the Central Government i.e. Government of India, the contract is executed in the name of the President of India.
Whenever the party is any State Government, the contract is executed in the name of the Governor of that State.
Article 299 (1) states that ‘All contracts made in the exercise of the Executive power of the Union or of a State shall be expressed to be made by the President, or by the Governor of that state, as the case may be and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the President or the Governor by such persons and in such manner as he may direct or authorise.’
In New Marine Coal Pvt. Ltd. v. Union of India AIR 1964 SC 152, the Hon’ble Supreme Court held that a contract not complying with any of the requirements stated under Article 299 (1) is void and is not binding on and non-enforceable by the Government.
The authority to execute the contract may generally be found in rules framed or notifications issued by the respective government.
For Example: The President of India, acting through Mr. Rajan Sharma, Additional Chief Secretary, Ministry of Finance, Government of India.
The Governor of Haryana, acting through Mr. Sandeep Brar, District Magistrate, Panipat, Government of Haryana.
When the Party is a Statutory Body
Statutory bodies are formed by way of a statute and by using the authority conferred by a statute.
A contract, in this case, is executed in the name of the statutory body, its representative’s designation and registered address.
For example, National Human Rights Commission, represented by Mr. Akshay Mehta, Secretary General Chief Executive Officer, having its office at GPO Complex, Manav Adhikar Bhawan, Block-C, INA, New Delhi-110023.
When the Party is a Society
When the party to a contract is a ‘society’ registered under the Societies Registration Act, 1860 or any other state laws, the contract shall be executed in the name of the society itself. It shall also include the registered address of the society and the details of the persons authorised to execute the contract.
For example: Unique Art, a society within the meaning of Haryana Registration and Regulation of Societies Act, 2012, with PAN xxxxxxxxxx, having its registered office at 24, Sadar Bazar, Karnal, Haryana – 132001, represented by its chairperson Mr. Vijay Kumar.
When the Party is a Trust
When the party to a contract is a trust created within the meaning of Indian Trusts Act, the contract shall be executed in the name of the trustees of such trust and not in the name of the trust itself.
As per Section 13 of the Indian Trusts Act, 1882, a trustee is bound to maintain and defend all such suits, and (subject to the provisions of the instrument of trust) to take such other steps as, regard being had to the nature and the amount of the value of the trust property, maybe reasonably required for the preservation of the trust property and the assertion or the protection of the title thereto.
For example: Ms. Neeru Singh, daughter of Mr. Ramesh Singh, trustee, representing SNR Trust, a trust formed under Indian Trusts Act, 1882.
Section 48 states that where there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust otherwise provides.
Therefore, where there are more than one trustees, the name and details of all the trustees shall be provided.
References
- Contract Drafting and Negotiations course by Lawctopus
- Indian Contract Act, 1872
- The Constitution of India, 1950
- The Indian Partnership Act, 1932
- Indian Trusts Act, 1882
- Companies Act, 2013
- Limited Liability Partnership Act, 2008
- Societies Registration Act, 1860
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