Commercial Division Blog
Person Who Signs Contract on Behalf of Non-Existent Entity Personally Liable
On March 11, 2014, the First Department entered a decision in Sunquest Enterprises, Inc. v. Zar, 2014 NY Slip Op. 01551, addressing the issue of a contract entered into by an allegedly non-existent entity.
In Sunquest Enterprises, the court examined the question of whether defendants who signed a contract on behalf of a non-existent entity were personally liable under the contract. While the court affirmed the trial court's holding that there was a question of fact regarding the entity's existence, it explained that "[p]laintiff is correct that, had defendants entered into a contract on behalf of a non-existent entity, . . . they would be personally liable under the contract."
This decision shows the importance of making sure that the contracting parties in an agreement are correctly identified.