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Identifying the correct entity that owes you Money

Thursday, March 16, 2017

It is important when entering into a contract that you know who you are contracting with. Following these steps will make it easier to identify who you have contracted with in the event that a dispute arises or they owe you money:

  1. Identify the entity that you have entered into the contract with;

  2. Know when you are dealing with a trustee by conducting searches; and

  3. Conducting research into the company’s name and confirming with the other party to the contract.

The Business Contract

  • Look to the contract so you know exactly who you are dealing with. The written contract will set out all the relevant details for the parties.

  • Where there is no written contract, it does not mean there is no contract in place, but it can make it difficult to identify the parties and the terms of the contract will be less certain.

  • If you have an oral agreement, a conversation will need to be identified as the basis for establishing the business relationship. This will be important in identifying your who you are contracting with.

  • A written contract is desirable because it is clearer who you are dealing with.

The purchaser’s identity

  • Even with a written contract, issues may arise in identifying the entity you have the agreement with. It is essential to determine the correct identity of the purchaser at the time you enter into the contract.

  • An example is when the purchasing entity has a similar name to other businesses trading elsewhere. This makes it difficult to determine the entity you have the contract with.

  • Where you have individual purchase orders or transactions identifying an entity, it will be presumed the named entity on the invoice is the party to the contract.

Businesses which are operated by Trading Trusts

  • It is important to know if the business you are dealing with acts within its own right or as a trustee.

  • If a business is operated by a trust, it means that there is a trustee. A trustee is usually a company holding the business assets on trust for beneficiaries, under a trust deed.

  • The trust company will generally be liable for debts incurred in their capacity as a trustee. However, a trustee company will have a right of indemnity or ‘protection’ against the trust assets for the debts incurred.

  • If a trustee is no longer acting as a trustee, it will become even more difficult for a creditor to access the trust assets to recover their debt.

Searching the entity name- always confirm with the other party.

  • By undertaking the following searches before entering the contract, a lot of stress will be saved in trying to collect any outstanding debt:

     

  1. Carry out a search of the company name listed on the contract using the ASIC free company search. This gives a list of business names and entities which are similar. The search results can be used to confirm you are contracting with the correct entity and checked with the other party.

  2. Conduct an ABN search on the Australian Business Register which is helpful in determining the right business entity. It will also determine if there is a trust in place. The search should provide the correct business name and ABN to be included in the contract.

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