The Acrimonious Acronym – When in doubt, spell it out!

Posted by William J. Piercy on

Event planner Joshua Salazar was hired by the Convention Organizing and Leadership Team, Inc. to book a convention hall at the Sheraton Atlanta Hotel.  Mr. Salazar signed a rental agreement with Sheraton on behalf of “C.O.L.T., Inc.” as “Meeting Coordinator/Acting Chairman”, a title the company authorized him to use although he was not an employee.

The Convention Organizing and Leadership Team, Inc. later cancelled the reservation, but failed to pay the cancellation fee. Sheraton then sued Mr. Salazar directly, arguing that because C.O.L.T., Inc. was a non-existent entity, Mr. Salazar had effectively signed the contract in his individual capacity and was personally liable.

The trial court threw the case out and Sheraton appealed.  The Georgia Court of Appeals considered whether Mr. Salazar’s use of the acronym, C.O.L.T., Inc., sufficiently manifested an intent to bind the Convention Organizing and Leadership Team, Inc. to the contract.  Siding with Mr. Salazar, the court found that C.O.L.T., Inc. was, at most, a misnomer and that the parties intended and understood that the Convention Organizing and Leadership Team, Inc. was the party to be bound.  Mr. Salazar’s explicit identification of the capacity in which he signed the contract was also persuasive.

The court distinguished these facts from those of another Georgia case in which the individual who signed a contract on behalf of “RBJ Textiles” (a non-existent entity) was found individually liable, despite his claimed intent to bind RONJON, Inc. In that case, the court found that RBJ Textiles and RONJON, Inc. were sufficiently dissimilar to “appear to be completely separate legal entities.”

These cases underscore the benefits of clearly and consistently identifying the parties to be bound by a contract and the corporate capacity of those signing on behalf of another.  When in doubt, spell it out.