25 July 2013 by Vincent Billings

Signed, sealed, delivered…but by whom?

As all company directors will know, it is very important to keep your personal and professional lives separate. When it comes to contracts, things are no different.

The Court of Appeal has recently handed down its decision in Hamid v Francis Bradshaw Partnership concerning the capacity in which directors of companies sign contracts. The claimant (being an individual who also owned a company) engaged contractors (the defendant) to carry out works on a property that the claimant purchased in his individual name. The claimant was unsatisfied with the quality of the work and sued the contractors. Amongst other things, the claim turned on whether the agreement was signed on behalf of the claimant’s company or by the claimant in his individual capacity. The defendant argued that the agreement had been executed by the claimant’s company because, had this been proved, no loss would have been suffered by the claimant’s company because it did not own the property.

The claimant had engaged the contractors by letter using letterheaded paper that referred to a trading name of the claimant’s company. The main issue considered therefore was whether the claimant signed the letter in his capacity as a director for and on behalf of his company or in his personal capacity.

The Court of Appeal held that the claimant personally entered into the contract. Notwithstanding the reference to his company the absence of any qualification to his signature meant that the contract could be interpreted as having been signed by the claimant in his personal capacity. The mere reference to the trading name of the claimant’s company was not an effective qualification. Therefore the claimant personally, and not the claimant’s company, was the contracting party.

The attempt by the defendant to argue that the agreement was in the name of the claimant’s company failed. Conversely therefore, had the claimant been the subject of an action (for instance in respect of the defendant’s unpaid fees) he, rather than his company, would have been the subject to the claim.

Where the capacity in which a signatory signs is at issue, the signing party is regarded as the contracting party in the absence of any contrary indication in the contract. This decision highlights the importance of including clear wording in contracts (for example, in signature blocks) to indicate the capacity in which the signatory is signing.

For more information and advice regarding commercial contracts, please contact us on 0207 288 4700 or email us at info@boltburdon.co.uk

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To BBQ or not to BBQ that is the question!

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