Contracts should be signed correctly by the right people
The names of the parties to a written agreement are generally set out at the beginning of the contract and also in the signature blocks at the end. Contracts made by companies are normally signed on their behalf by someone with express or implied authority to do so.
In Hamid (t/a Hamid Properties) v Francis Bradshaw Partnership [2013] EWCA Civ 470, the court had to decide who had entered into a contract made in a letter written on notepaper containing the trading name of a limited company at the top and bottom of the page. The letter was signed by an individual, who inserted his signature above a printed version of his own name. The document included email and web addresses ending in the domain name “.co.uk”, but did not describe the signatory as a company director and gave no indication that the counterparty was dealing with a limited company.
Was the contract made by the individual or the company? The individual who signed the contract was the sole director and shareholder of the company. However, he also conducted business on his own behalf and planned to develop the land to which the contract related, which was in his legal ownership, for use by the company.
The design and construction team understood that they were acting for “Moon Furniture”, which was the trading name of the company, but were not told that it was a company. Nonetheless, the engineering firm on the wrong side of subsequent proceedings for breach of contract assumed that Moon Furniture was a limited company. The firm defended the claim on the ground that it was being sued by the individual in his personal capacity, despite the fact that it had contracted with the company. There were good tactical reasons for this defence; the company was not the legal owner of the property and had not suffered any of the losses claimed.
The Court of Appeal agreed that it is possible to refer to extrinsic evidence to help identify a contracting party whose identity is unclear. In such circumstances, the question is what a reasonable person, furnished with the relevant information, would conclude. The private thoughts or beliefs of the protagonists are irrelevant. However, such evidence as existed was of no assistance here and the court chose to focus on the capacity of the signatory, as opposed to his identity.
Had the individual contracted personally or signed the letter as director of, or agent for, the limited company? The court decided that the individual was the contracting party because he had signed the document without qualifying his signature or stating that the contract did not bind him personally. Indeed, had the letter been written on the company’s behalf, the failure to identify itself, or to provide its registered office, registration number and place of registration would have constituted criminal offences punishable by fines.
The court tested its reasoning by considering what the position would have been had the company issued the proceedings. It concluded that its position would have been untenable because there was nothing to suggest that the contract was made on behalf of the company. Consequently, a reasonable person analysing the letter objectively would conclude that the contracting party was the individual and not the company.
Allyson Colby is a property law consultant
