Companies cannot physically “sign” documents themselves – someone must sign on their behalf. Where signatures are accompanied by a description of the capacity in which the signatories have signed, the description given will provide factual evidence of the identity of the parties who are accepting liabilities under the contract.
Is a contract binding on a company if the individual signatories – who are also parties to the contract in their own right – have omitted to state that they are also signing the document on behalf of the company?
In Redcard Ltd v Williams [2011] EWCA Civ 466; [2011] PLSCS 117, the parties signed a contract for the sale and purchase of a building containing flats let to individuals who were directors and shareholders of the company that owned the freehold. The contract included provisions for the sale of all the interests in the building so as to enable the buyer to obtain vacant possession on completion.
Two of the individuals who signed the contract – and who had agreed to transfer their leasehold interests to the buyer – were also authorised signatories for the company. The court was asked to decide whether they had signed the agreement on behalf of the company as well as on their own account or whether the contract was incomplete because the company’s signature was missing.
The Court of Appeal upheld the contract. Section 44(4) of the Companies Act 2006 states that a document signed by two authorised signatories (or by a director in the presence of a witness) and “expressed in whatever words to be executed by the company has the same effect as if executed under the common seal of the company”. The agreement described the company as one of the sellers and the various signatures appeared at the end of the agreement under the words: “Signed … Seller.”
It would be absurd to say that a separate contract for the sale of the freehold interest had not been signed by the company if the authorised signatories had signed under those words without actually stating that they had appended their signatures “on behalf of” the company. Why then should the legal position be any different merely because the freehold and the leasehold transactions were dealt with in a single document?
The court dismissed arguments based on section 44(6) of the Companies Act 2006, which requires a person signing on behalf of more than one company to sign separately for each of them. Their lordships ruled that the section does not deal with a case where an individual signs a contract personally and also on behalf of a company – and was not relevant.
None the less, from a practical point of view it is sensible to include words describing the capacity in which an individual is signing a document to which a company is a party – and to ensure that persons who are signing an agreement for more than one party sign the document separately in each capacity.
Allyson Colby is a property law consultant
