Legal Memorandum: Contract with a Fictitious Entity

Issue: Whether a contract that is made with an entity that failed to file or renew a fictitious name registration (which constitutes an illegal business practice under Cal. Bus. & Prof. Code 17200) void or voidable?

Area of Law: Business Organizations & Contracts
Keywords: Illegal business entity; Contract; Void or voidable
Jurisdiction: California
Cited Cases: 15 Cal. Rptr. 582; 189 Cal. 353; 208 P. 973; 84 F. Supp. 2d 193; 803 P.2d 370; 277 Cal. Rptr. 517; 49 Cal. Rptr. 2d 686; 4 Cal. Rptr. 2d 583; 129 Cal. App. 4
Cited Statutes: Cal. Bus. & Prof. Code § 17900, § 17918; Cal. Bank & Corp. Tax Law § 23304.1(a); Bus. & PROF. CODE § 17200
Date: 12/01/2005

  A very early California case, C.E. Van Landingham v. United Tuna Packers, 189 Cal. 353, 208 P. 973 (1922), established that the legislature determined the terms and conditions upon which corporations may operate in California.  Id., 189 Cal. at 363.  In that case, the corporation failed to pay its state corporate license tax.  California statute provided that the failure of a corporation to pay it corporate license tax resulted in the corporation forfeiting its “rights, privileges and powers,” and that any person transacting business on behalf of a forfeited foreign corporation was guilty of a misdemeanor.  Id. at 368.  In addition, every contract entered into by a forfeited corporation was void.  Id.  Even the “subsequent revival of the corporate rights, powers and privileges” did not have the effect of validating the contracts made while the corporation was in a period of suspension.  Id. at 369.  Thus, a corporation that forfeited its right to do business by failing to pay its license tax was considered “dead” and could not function as a de facto corporation.  Nor could it enter into contracts, and any contracts purportedly entered into were void as a matter of law.  Id. at 370-71.

California’s fictitious business name statutes (Cal. Bus. & Prof. Code § 17900 et seq.) provide that no person transacting business under a fictitious name that has failed to properly register the name may “maintain any action upon or on account of any contract made . . . in any court of this state until the […]

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