Contracting Essentials – Who is your Contract With?

4 min read

There are a few fundamental questions we ask our clients about every potential contract dispute that comes our way.

One that’s nearly at the top of the list is this: who is your contract with?

Now that might sound like a silly question to some, but in a world with sole traders, partnerships, trusts, companies, joint ventures, associations and bodies corporate – it can start to get more complicated than you think.

And while we understand that this sounds like a straightforward issue, it’s also one that catches even experienced business people off guard, and sometimes that comes with the added problem that we can’t reliably figure out who to pursue for your legal rights.

So in this article we’re going to set out some fundamental principles to help you understand who are you getting into business with. That way, at the very least, you know who to get in touch with later if something goes wrong.

An Easy Start – Sole Traders

A sole trader is just a person in business.

They don’t have a company. They don’t have a partnership. It’s just them.

They might, however, have a business name or a trading name.

So if you get a quote or a draft contract, a sole trader is going to look something like this:

  1. Simon Simple’s Silly String;
  2. Simon Simple trading as Silly String;
  3. Simon Simple.

Most quotes or contracts will usually also have an Australian Business Number (ABN) on them in this case. The best thing you can do is check that ABN to make sure the details that show up match the person you think you’re dealing with.

But here it’s pretty easy – if something goes wrong or there is a dispute, it’s with Simon Simple.

Partnerships

The best way to think of partnerships is like it’s two or more sole traders (above) who decided to go it together, rather than alone.

Otherwise the details are usually similar, but there will be more names.

Also, when you check the ABN it will probably say “partnership”.

Now in a proper partnership, all the partners are responsible for the decisions of the others. So if you have to sue someone later, you’re usually suing all of them together (even if you only ever dealt with one of them).

Companies

A basic proprietary company is probably the most common business vehicle in Australia.

Unless the last two categories, a company is technically a legal person.

That means your contract is with the company, NOT with the people who own the company or manage its affairs.

A company’s going to look something like this:

  1. Silly String Pty Ltd
  2. SSSS Pty Ltd
  3. SSSS Pty Ltd trading as Silly String

So a company, much like a sole trader, can have a trading name that is different from its actual name.

The main distinguishing feature about a company is that you should be given an Australian Company Number in addition to an Australian Business Number.

This allows you to verify the company’s details at ASIC should you choose to do so, but it also helps you know for sure who your contract is with.

Trusts

Trusts tend to be where things go wrong.

That isn’t because trusts are particularly awful or dangerous, but rather because people don’t think to ask the right questions. What those questions are and how detailed you want to get are going to depend on the value and risk of the contract in question.

For this article though we’ll stick with the fundamentals.

You’ll recognise a trust because it looks something like this:

  1. The Frank Farlow Enterprise Trust
  2. Frank Farlow atf The Farlow Family Trust
  3. FF Pty Ltd as trustee for the Farlow Trust

The number one most important rule for you to know is this: a trust is NOT a person. You cannot make a contract with a trust, you cannot sue a trust.

Where a trust is involved, you need to know who the “trustee” is. In our examples above, (1) we can’t tell, (2) is Frank Farlow and (3) is FF Pty Ltd.

The trustee is the actual person you are doing business with.

The reason this matters is because if you don’t know who the trustee is, there’s absolutely no way of finding out later unless you get lucky. There’s no register of trustees that will help you find out.

So if you’re contract is with the Smith Family Trust and you have to sue them for defective work down the track, it’s going to be an expensive up-front mission just figuring out who you had a deal with in the first place.

So, where a trust is listed make sure there is also an associated person or company that is the actual party to your contract or deal. Just the name of a trust is not good enough.

Owners Corporations

Owners Corporations are best thought of as a special type of company.

Much like companies they can own property, enter into contracts, sue people and be sued by people.

They are a separate legal “person” for those purposes.

Always Address Confusion First

So let’s say you’re in the process of signing up a new client, and in the “customer name” field they write “The Beaufort Trust trading as Huegenburg Horns”.

Here, you have:

  1. A trust; and
  2. A trading name.

Neither of these things are a legal “person” you can enter into a contract with, so if you’re going ahead then you’re doing it mostly blind.

The best bet is to address anything confusing like this by simply asking the question or running some searches to see if you can figure it out. But either way in an ideal world the contract documents will have the correct legal entities named on them.

Correct Contracting Saves Time Later

While it sounds simple enough, issues relating to identifying parties to a contract occur all too regularly. It makes any later dispute more expensive (and sometimes more difficult), and is easily avoided through a few checks and balances before you do your next deal.

If you need help with this kind of business system, don’t hesitate to reach out and we can get you sorted.

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Picture of Authored By<br>PBLTeam

Authored By
PBLTeam

Director Lawyer, PBL Law Group

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Jye Hall
Anita Bradley has been an absolute dream to deal with. Anita's conveyancing skills and knowledge knows absolutely no boundaries along with her effective communication skills which has made selling and buying a completely stress free exchange for us. We recommend PBL Law to everyone looking for outstanding service. We will definitely be returning clients.
Kushlan Aluwihare
PBL Law Group were fantastic. Anita from PBL worked with us closely during our property search and made the exchange and settlement process smooth and stress free. Highly recommended.
Gail Whitford
PBL handled my late mothers estate, they were very obliging and patient with any and all questions that we had, thank you to David , Sharon and the other staff that we dealt with, everyone was so easy to talk to and friendly .David came to the home where my Mother was living and helped her to get her will in order, Sharon helped us through the process of executing her wishes when the time came even doing a house call which was so much easier, thank you all so much
S M
I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
Amanda Reitzin
The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
Ricky Cooper
Anita is amazing! So attentive, approachable and communicates everything every step of the way. I have now bought and sold property with Anita and I cannot recommend her highly enough.
Ron Thomsen
Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
Tricia Wheatstone
For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.