Agent Authority – Who is signing on your behalf?

In a recent High Court case, the Court ruled that an agent does have sufficient authority to enter into a personal contract of guarantee and indemnity using a signature machine on behalf of the principal contracted party.

The case revolved around the grant of a lease of premises. In accordance with the terms of the lease, the obligations of the leaseholder were to be guaranteed by an individual. The individual concerned duly signed the lease as guarantor. The individual argued that the guarantee was signed by the agent who did not have authority to sign the guarantee. Furthermore, the agent used a signature machine to execute the individual’s signature.

In 2011 the individual who had guaranteed the obligations of the leaseholder, told the freehold owner that he was not bound by the guarantee signed by him. Subsequently proceedings were commenced and the Court was asked to determine whether the individual was bound by the obligations imposed upon him in the guarantee.

The Court looked at the evidence presented before it, although surprisingly, no evidence was given by the agent at trial.

The Court’s ruling determined that the agent did have authority to sign the personal guarantee on behalf of the individual. Upon making such a ruling the Court took into account the fact that the agent and individual had a twenty year working relationship, which was strengthened by strong family ties. When questioned at trial, the individual stated to the Court that he had told the agent that if there was ever a time when his business could not support a lease, then he would give a personal guarantee. Combining the above statement with the accounts of the leasehold company, it was clearly evidenced that this was a situation where the individual would need to give a personal guarantee.

In relation to the use of the signature machine, the Court found that the individual would have had knowledge of the machine. Crucially, the machine had been used substantially in the past to place the individual’s signature on legal documents.

The above case is a useful reminder to anyone who is using an agent, to clearly set out the exact scope of the agent’s authority.  The case further provides authority that signature machines can be used to bind parties to an agreement, if it can be proved that there was authority to use the machine.

If you have any questions regarding the above article or require advice on any other commercial litigation matter, please contact us on 0207 288 4700 or email us at info@boltburdon.co.uk.