Importance of disclosing correct employer

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.

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. 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

What an offer of employment might look like

More on Employment Agreements

Employee trial periods	Can change pay frequency if properly managed
More on secret video cameras	Appeal Court decision on harsh and oppressive contracts
When is an employment relationship formed?	Employment contracts must be negotiated - they cannot just be presented
Employer can still be bound by oral agreements	Cannot limit remedies for personal grievances
Common problems with employment agreements	Cannot dismiss without reason even if written in agreement
Take care when preparing employment agreements	Can a collective employment contract negotiated with union members be applied to non union members?
Importance of disclosing correct employer	Employee must disclose information at interview only if asked
Disputes resolution procedure must be included in staff agreement	Cannot require all employees to apply for new positions
Renegotiation of employment contract on sale of business	What an offer of employment might look like
Expired contracts continue with same terms and conditions

Alphabetical Index

Case Law