What Happens If You Contract With an Unregistered Company, or a Company Uses an Incorrect Name?

Take time in contracting

Before contracting with a business in Georgia, it is good practice to check whether the entity is registered to do business in this state, particularly if the business is operating as a corporation or limited liability company.  You can search a company’s name on the Secretary of State website.  If the entity is not registered (or is dissolved), it may be cause to question moving forward or at least get more information.  If you find a name that is similar but does not exactly match up, there are valid reasons to clarify the name prior to executing the contract.  Taking time to do these things can held avoid disputes or confusion down the road. 

But what happens to the contract if a contracting party is not properly registered or uses an incorrect name?  Can you still sue if any disputes arise?  The answer is yes.

Contracting with an Unregistered Company

In Georgia, a company that has failed to register with the Georgia Secretary of State may still enter into a contract, and the contract will not be rendered void or unenforceable due to the company’s lack of registration.  This applies to businesses based in Georgia as well as businesses located out of state doing business in Georgia. 

However, unregistered foreign entities doing business in Georgia face procedural hurdles when suing on a contract in Georgia.  A foreign corporation or limited liability company transacting business in Georgia without a certificate of authorization “may not maintain an action, suit, or proceeding in a court of this state until it is authorized to transact business in this state.”  The lack of registration still does not invalidate the contract or any corporate acts or prevent the foreign entity from defending against any action, suit or proceeding in Georgia.  See O.C.G.A. §§ 14-2-1502, § 14-11-711. 

This principal also applies when a business contracts under an unregistered trade or partnership name in Georgia.  O.C.G.A. § 10-1-491 expressly validates contracts entered into by entities operating under unregistered trade or partnership names. 

Contracting with a Company That Uses an Incorrect Name

A company may change its name over time.  When a name change occurs, the company should use the updated name in communications and contracts to avoid confusion or disputes.   This does not always happen. While it may not be best practices, a company’s use of its old name in a contract should not render the contract unenforceable or invalid.  The reason is a name change does not create a new entity or alter a company’s obligations or liabilities.  Georgia courts have also held a company can be sued under its new name even if the claim arose before the name change.  American Bitumuls & Asphalt Co. v. Homer Leggett Constr. Co., 119 Ga. App. 170 (1969). 

Similarly, a name error or corporate misnomer in a contract will not invalidate the contract, deprive the misnamed party of its ability to sue on the contract, or protect the misnamed party from being sued for breach of the contract as long as the identity of the misnamed party is clear and can be ascertained.  Johnson v. Unified Residential Dev. Co., 285 Ga. App. 852, 858 (2007).  Issues can arise if the parties do not agree it was a mutual mistake and there is a dispute as to the intended entity.   

As a practical matter, using an old or incorrect name when doing business may not automatically invalidate a contract but may reflect negatively on the company’s sophistication or compliance.  It can also lead to administrative inefficiencies or disputes requiring additional evidence to establish the intended contracting party and the parties’ intent. 

If you need assistance reviewing a contract or would like assistance with a legal matter, please reach out to The Ewing Firm at melissa@theewingfirm.com or (404) 216-9962 for an initial consult.