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When entering into a business relationship it is the intention of both the buyer and the seller to contract.
This creates legal obligations and as such it is vitally important that you are able to identify the customer.
The following will serve to emphasise this.
An application for an account is received from "Arnold Homes". If the account is opened in this name without clarification of the partners, and the account is passed to solicitors, the question arises, who do you sue. In other words, who have you contracted with. A partnership firm unlike a limited company is not a separate entity, and although a creditor has the right to sue in the name of the firm, "Arnold Homes", to be successful, the partners must be joined in the action. It is therefore essential that before trading is commenced the identity of the partners is to be established.
Instances have occurred where accounts have been opened for alleged partnerships, only to find that you are creditors of insolvent limited companies.
Another difficulty occurs when there is no knowledge of a customer's christian name. Let us assume that an account has been opened for Mr. Smith. Although it is possible to obtain a Claim against Mr. Smith, on whom do you serve it? Identification of sole traders or partnerships must be on christian names as well as surnames.
When and how can such anomalies be obviated? It is imperative that the prime identity of a customer in commercial and legal terms be established at the time of appraisal. Confirming information from Credit Reference Agencies, Companies House, and Trade Referees will verify a potential customer's title. In the absence of a reply from a trade referee this may well be an indication that due to insufficient detail in the trading style the matter has been left in abeyance. Telephone calls in such circumstances frequently resolve what would otherwise result in a difficult and perhaps dangerous situation.
Should discrepancies be apparent in a customer's trading style, verification may be established from the following sources.
A search of the companies registry will confirm the existence of a limited company.This can now be done online through the Internet. Should a search of company records fail to reveal the existence of the company in question, it will be necessary to seek confirmation of the trading style from the customer.
Headed Notepaper and Orders. It is surprising how this source is often overlooked. A search in the sales office or operating branch will in lots of cases find the answer to the problem.
It is usual for a business to subscribe to the BT telephone service, and as such should be listed in the directories.
Whilst the identification of customers may be confirmed by any of the aforementioned, methods, it is essential that identification is made at the outset. Failing this, and particularly in telephone conversations, extreme care should be taken in the transcribing of names and addresses.
As all business organisations are subject to common or statute laws which gives the rights of individuals acting singly or in organisations, and also the rights of creditors, it is not only essential to identify with whom you are dealing, but it is also necessary to have an understanding of the various types of business organisations. The three main types of businesses are: