A contract Enurement clause that pierces the corporate veil.

[Mar...@cleaver.org]

A new client is asking me to sign a contract that includes:

14. ENUREMENT

This Agreement shall enure to the benefit of and be binding upon the Parties and their respective successors and assigns, including without limitation their heirs, executors, administrators and personal representatives.

This is in a contract between a new client and my company but parties includes specifically, the client, my company, and myself

So this enurement clause appears to bind not only my company, but me personally, and the assets of my family.

This seems unreasonable and going against the point of having a corporation.

Would you sign it?

BETWEEN:

A certain crown corporation

- and -

BLENDED PERSPECTIVES INC.

(the "Consultant") 

-and-

MARTIN CLEAVER

 (individually the "Party" and collectively the "Parties"

Thanks and regards,

   Martin

--
Mar...@Cleaver.org
http://twitter.com/mrjcleaver
+1 416-786-6752 (GMT-5)

[Stephen van Egmond]

This is in a contract between a new client and my company but parties includes specifically, the client, my company, and myself

This means, among other things, that if you die, your heirs can collect.

Equally, if you die, your heirs can exercise the termination clauses.

It's unclear to me why you personally would be a party to the contract. I would sign it back with that removed.

[Richard Dice]

On Wed, Feb 18, 2009 at 11:34 AM, Stephen van Egmond <svane...@tinyplanet.ca> wrote:

This is in a contract between a new client and my company but parties includes specifically, the client, my company, and myself

This means, among other things, that if you die, your heirs can collect.

Equally, if you die, your heirs can exercise the termination clauses.

Assuming the work for the customer is complete and that Martin's family is the inheritor of his estate (which presumably would include ownership of his corporation) then his heirs would be able to collect anyhow, as they would become the new owners of his corporation.  Then, they would elect themselves to the be the new officers and executives of the corporation, thus enabling them to execute the business of the corporation, which would include collecting accounts receivable.

At least that's my take on it.

Cheers,
 - Richard

[Mar...@cleaver.org]

<Martin's> heirs would be able to collect anyhow

I think this would be the case even if was not personally named as a party.

Me being named as a party is redundant as a benefit to me, and has a detrimental effect in that if my corporation was unable to subcontract to complete the work then the contract would allow the other party to pursue personal assets to undo the contract.

Corporations exist to allow people to try professional endeavors without risk to their personal situation.

Best, and thanks,

   Martin.

--
Mar...@Cleaver.org
http://twitter.com/mrjcleaver
+1 416-786-6752 (GMT-5)

[Alexei R]

Hi Martin,

 

Interesting,

 

I had a similar case and it was about Confidentiality Agreement.

 

It was a point that client does not care either I was corporation or self proprietary consultant. They wanted to guard their intellectual property in all possible ways.

 

I’m interested to know what you’re going to do.

 

Regards,

Alexei Rebrov
Web Architect & UX Specialist
web: http://rebroff.com
cell: 416-902-2869

---

[Michael Sims]

On Wednesday 18 February 2009, Mar...@Cleaver.org wrote:

> A new client is asking me to sign a contract that includes:

> -and-

>

> MARTIN CLEAVER

Meh, just cross yourself off and tell them you do business as a corporation. If the individual you're dealing with disagrees, ask them if they'd like to be individually listed as part of the contract so that they are personally liable if their crown corporation doesn't pay up.

Michael Sims

[Sandy Kemsley]

I would never sign a contract that bound me personally. That's the whole point of forming a corporation. Confidentiality and non-disclosure agreements, however, typically bind the person as well as the company.

---

From: tor...@googlegroups.com [mailto:tor...@googlegroups.com] On Behalf Of Mar...@Cleaver.org
Sent: February 18, 2009 11:10 AM
To: tor...@googlegroups.com
Subject: A contract Enurement clause that pierces the corporate veil.

[David]

The enurement clause itself should not be an issue. All it means is
that successors and assigns can receive the benefit of the agreement
(as opposed to terminating with the termination of the existence of
either party).

Although you are being identified personally as a party to the
agreement, it is unclear what liability the counterparty is attempting
to attach to you personally. The fact that you are named as a "party"
does not itself determine liability. If for example the only
obligations set forth in the document refer to "Consultant", then it
would be difficult to see what liability attaches to you personally.
Granted, it is a technical point, but they may have included you as a
party to bind you, for example, only to the confidentiality
provisions.

Apart from that, the question of whether personal liability is or
isn't appropriate depends on the circumstances. For example, when
dealing with personal service corporations (i.e. corporations that
basically have only one employee, who is also the primary shareholder,
and will in effect perform all the obligations of the corporation and
also controls the corporation), often counterparties will insist on
personal liability, since, typically, the corporation has no
substantial assets to back up a claim, or assets that can be moved
quickly. You are correct that one of the reasons for a corporation is
to insulate the shareholders from liability. However, the question
that counterparties might ask in this situation is why there should be
such an insulation, particularly in the case of a personal
corporation.

I'm not suggesting that personal liability is or is not acceptable -
at the end of the day it depends on your risk tolerance and the
liability exposures in the agreement. For example, if you have a very
strong limitation of liability in your agreement, personal exposure
might be less of an issue. Conversely, if you don't, and there is a
real risk of being sued, then you might be OK with it. It will also
depend on what the other side is looking for as well. Consider asking
them why they are looking for personal liability, and why, for
example, you should put your house at risk under the agreement. There
may very well be a means to address their underlying concern without
the need for personal liability. For example, if they are concerned
about the corporation not having any assets against which they could
seek recourse in the event of a claim. One possible way to address
this would be to require the company not to dividend any amounts out
for a certain period of time (assuming this is feasible).

And, to be clear, if you do sign on in your name for certain
obligations, all your personal assets will be at risk - your house,
bank account, car, etc.

Also, on confidentiality obligations, it may be preferable, instead of
signing an NDA directly, to include in your agreement that your
corporation will cause its employees, etc. (which presumably includes
you) to comply with the obligations of confidentiality set forth in
the agreement.

Hope this is of some assistance. And sorry for the disclaimer but I
must indicate that the above is for information only, does not
constitute legal advice and is not intended to create a solicitor-
client relationship, and is only being provided on an "as is" basis
without any obligation or liability whatsoever.

On Feb 18, 11:10 am, "Mar...@Cleaver.org" <Mar...@Cleaver.org> wrote:
> A new client is asking me to sign a contract that includes:
>
> 14. ENUREMENT
>
> This Agreement shall enure to the benefit of and be binding upon the

> Partiesand their respective successors and assigns, including without

> limitation
>
> > their heirs, executors, administrators and personal representatives.
>
> This is in a contract between a new client and my company but parties
> includes specifically, the client, my company, and myself
> So this enurement clause appears to bind not only my company, but me
> personally, and the assets of my family.
>
> This seems unreasonable and going against the point of having a corporation.
>
> Would you sign it?
>

> *BETWEEN:*

>
> A certain crown corporation
>
> - and -
>
> BLENDED PERSPECTIVES INC.
>

> (the "*Consultant*")
>
> -and-
>
> MARTIN CLEAVER
>
>  (individually the "*Party*" and collectively the "*Parties*"