The recent Court of Appeal case of Hamid v Francis Bradshaw Partnership has highlighted the importance of ensuring that the identity of the parties to - and the capacity of a signatory of - a contract are clear.
Dr Hamid was the director and sole shareholder of a limited company, Chad Furniture Store Limited, which traded under the name "Moon Furniture".
He owned land on which he intended to build a showroom for Chad, and negotiated with Francis Bradshaw Partnership (FBP) over the provision of engineering services.
Dr Hamid recorded the pricing for the contract in a letter headed Moon Furniture. He signed his name above his typed name, which itself was above the name Moon Furniture. There was no indication that Dr Hamid was signing as director of, or on behalf of, Chad, or that Moon Furniture was a trading name of Chad.
Dr Hamid found FBP's work inadequate and sued them for damages. FBP argued that Dr Hamid wrote and signed the letter on behalf of Moon Furniture, so that the letter was sent on behalf of whatever entity traded under that name. Therefore, their contract was with Chad, not Dr Hamid, and on that basis it could be argued that Chad had not suffered loss, as it did not own the property on which the works were carried out.
The Court of Appeal made clear that the central issue was not one of identity, but of capacity, and the crucial question was whether Dr Hamid was (a) contracting personally, or (b) signing the letter as director of - or agent for - Chad.
It upheld the High Court's decision that Dr Hamid was the party who contracted with FBP. Dr Hamid did not qualify his signature or make it plain that the contract did not bind him personally. The reference to Moon Furniture without any indication that this was the trading name of Chad was also not an effective qualification.
What does this mean?
Whilst the decision is unsurprising given the facts of the case, the judgment helpfully summarised the principles to be taken into account in determining the issues of both identity of parties to a contract and the capacity of those signing it.
Notably, the court confirmed that, in questions of identity, the court will take an objective, rather than subjective, approach - what a reasonable person, furnished with the relevant information, would conclude. Private thoughts concerning who was contracting with whom, will be irrelevant and inadmissible.
Where there is a question over whether a person has signed a document as principal or as agent for someone, the principle is that the person who signs a document is the contracting party unless (a) the document makes it clear that he signed as agent for a sufficiently identified principal or as the officer of a sufficiently identified company, or (b) extrinsic evidence establishes that both parties knew he was signing as agent or company officer.
What should you do?
The case is therefore an important reminder to ensure that:
- each party to a contract understands who the other contracting parties are and that the identity of each party (including their own) is set out clearly and unambiguously in the contract
- signatories to a contract make it clear in which capacity they are signing - if the person signing the contract does not intend to be bound by it personally, then they must ensure it is clear they are signing on behalf of another person or entity
Failure to do so may result in the inability of an intended party to enforce the contract or liability under its terms attaching to an unintended party.
Case: Hamid v Francis Bradshaw Partnership [2013] EWCA Civ 470