Many employers are incorporated companies. Some use a different trading name from their company name. As a High Court case illustrates, it is important that company directors disclose when they contract with employees and creditors that
they are doing so on behalf of a company, and the company's proper registered name. Failing to do so may mean that the director becomes personally liable for performance of the contract, including payment of any debt owed under it.
Tom Flynn, a farmer, owned a number of entities including a company called Makeno & Whareroa Stations Ltd. He frequently purchased stock from the
Farmers Co-operative Organisation Society of New Zealand Ltd ("Taranaki Farmers"). Stock Agent, Mr Luttrell told the Court that "Mr Flynn would telephone and advise
me of which of his accounts with Taranaki Farmers the purchase price of the calves was to be charged to. At that time he had accounts in the name of Flynn Brothers, Whareroa Station and Tom Flynn."
In June 1989, Mr Flynn requested Taranaki Farmers to close the Flynn Brothers and Whareroa Station accounts and transfer their debit balances to the Tom
Flynn account. From June 1989 onwards, all purchases were charged to this account. Mr Flynn failed to pay his account and Taranaki Farmers sued him for the
outstanding balance. In his defence, Mr Flynn claimed that the debt was not owed by him, but rather was owed by his company, Makeno & Whareoa Stations Ltd. This company was placed in receivership on 17 April 1991.
The High Court rejected his defence. When persons having authority so to do enter into contracts on behalf of a company then the law of agency applies. If an
agent enters into a contract without disclosing either that he or she is acting as an agent or the name of the principal then he or she incurs personal liability for the debt. The onus is on the person claiming to be an agent to make the agency
and the identity of the principal clear. Mr Fynn had failed to do this when he had purchased stock from Taranaki Farmers and was therefore personally liable for the debt, the Court said.
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Under section 65 of the Employment Relations Act 2001 all employment agreements are required to be in writing and must include a number of things, including the names of the employee and employer concerned.
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It is important that companies record their correct registered name, otherwise the person signing the agreement for the employer may find him or herself personally liable
for performance of the agreement, including payment of any debt owed under it. | | More Information
More on Employment Agreements
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What an offer of employment might look like
Employee trial periods