By Adam Whiteman, Commercial Collection Attorney
If you are entering in to a contract or a credit agreement by which you will be providing goods or services to another business, it is critical that you correctly identify your customer’s name on the contract and/or credit agreement. Don’t just accept the customer’s representation as correct. Confirm the exact business name with the Secretary of State and make sure the entity is in good standing.
The misidentification of your customer‘s actual legal name on a contract can create real problems if you have to file a mechanics lien to protect your rights.
The Illinois Mechanics Lien Act provides that a lien, “…shall consist of a brief statement of the claimant’s contract…” (770 ILCS 60/7) This means that the lien must property identify the parties to the lien claimant’s contract.
Make sure you correctly identify the party with whom you are contracting on both your contact and on the lien. In Ronning Engineering Co., Inc. v. Adams Pride Alfalfa Corp., 537 N.E.2d 1032, (ⅠⅠⅠ. App. 4 Dist., 1989), the plaintiffs complaint alleged a contract between the plaintiff and an entity called “Adams County joint Venture.” However, the lien itself described a contract between the plaintiff and an entity called “Adams Pride.” As a result of this incongruity, the plaintiff’s lien was deemed invalid because it incorrectly named the parties to the Plaintiff’s own contract, i.e., it described the “wrong contract.”
Similarly, make sure that you accurately describe your own company on both the contract and the lien. In Candice Company, Inc. v. Ricketts, 666 N.E.2d 722(1 st Dist. 1996), the lien claimant’s name on the contract was “Father and Sons, Inc.” However, the lien claim itself identified the contracting party as “Candice Company, Inc.” Thus, the lien claimant who was identified as the contracting party on the lien claim did not match the name of the lien claimant identified on the actual contract giving rise to the lien. The court therefore held that the lien, “incorrectly describes the parties to the contract on which the lien is purportedly based and therefore, does not meet the requirements of section 7.” Id. 666 N.E.2d at 725; see also Bale v. Barnhart, 798 N.E.2d 750, 755 (4th Dist. 2003) (Where the lien identified two different lien claimants, – Martin L. Bale d/b/a Bale Excavating and Farm Drainage, and Carla S. Bale—the court determined that this conflict “creates an ambiguity that results in an inaccurate description of the contract.”).
So, don’t be lax or casual when entering the names of the parties on a contract or mechanic‘s lien. Mistakes in this regard can be fatal when it comes time to prove up a lien claim. In business, you have to know who you are dealing with.
Adam Whiteman maintains a law practice in Chicago Illinois which concentrates on real estate law, commercial collections, and civil litigation and transactions. [email protected]