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Court of Appeal considers whether signatory was contracting personally or on behalf of another

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The Court of Appeal has considered the basis for deciding whether the signatory to a contract was contracting personally or on behalf of another. (Hamid v Francis Bradshaw Partnership [2013] EWCA Civ 470) (Free access)
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The Court of Appeal has confirmed that an individual was party to a contract evidenced in part by a letter, even though he had signed the letter above and below a name which was the trading name of a limited company. This was because there was nothing in the letter to indicate that the name was the trading name of the company, rather than the trading name of the individual. The counterparty had no actual knowledge of the link between the trading name and the company (which was in fact owned by the signatory), and the fact that the connection could have been made from publicly available information was irrelevant. The court applied existing law to hold that the signatory became the contracting party unless he made it plain that the contract did not bind him personally. The decision provides a useful summary of the factors which the courts take into account (and are permitted to take into account) when deciding whether or not an individual is contracting in his own name or on behalf of another entity. (Hamid v Francis Bradshaw Partnership [2013] EWCA Civ 470)

Background

Identifying the parties to a contract is a question of fact and also, sometimes, of interpretation.
If the identity of the party executing the contract is at issue, extrinsic evidence (that is, not contained in the contract) is admissible, despite the parol evidence rule. (The parol evidence rule, which is subject to exceptions, provides that where there is a written contract, oral evidence cannot be received to add to, subtract from or vary the written terms (see Chitty on Contracts Volume. 1 (Sweet & Maxwell Thomson Reuters, 13th Edition, 2012), paragraph 12-096).
It may be that the identity of the party executing the contract is clear, but there is doubt about the capacity in which it did so - on its own behalf, or on behalf of another. Again, this is a question of fact and interpretation of the document in question. Extrinsic evidence may be admitted to establish that both parties knew the signatory was signing as agent or company officer. Apart from this, if a person wishes to be regarded as not being bound by a document, then he should qualify his signature or otherwise make it plain that the contract does not bind him personally (Internaut Shipping GmbH v Fercometal SARL [2003] EWCA Civ 812).

Facts

Dr Hamid was the director and sole owner of a limited company, Chad Furniture Store Limited (Chad), which traded under the name "Moon Furniture". He also owned land on a 999-year lease, on which he wanted to build a showroom for Chad to use. As part of this project, it was necessary to employ the defendants (FBP) to provide engineering services in connection with a retaining wall on the land. (Specialist foundation contractors were also engaged to design and install the retaining wall.)
No one told FBP that they were contracting with Chad. They were told that Dr Hamid owned the Moon Furniture business, which was (indirectly) true.
The contract for the engineering services was partly oral and party written, as Dr Hamid recorded the pricing for the contract in a letter to FBP. The letter was written under the heading “Moon Furniture” and a physical address, e-mail address, and website URL that all related to Moon Furniture. In the letter, Dr Hamid said "we" not "I". Dr Hamid signed his name above his typed name, which was above the name “Moon Furniture”. There was no indication that he might have been signing as a director of, or on behalf of, Chad.
Dr Hamid found FBP's work inadequate and sued them for damages. FBP argued, among other things, that the correct contracting party was Chad and not Dr Hamid. This question was tried as a preliminary issue. (If Chad were the correct claimant, then it could be argued that it had suffered no loss because it did not own the property.)
The High Court, interpreting the letter objectively, decided that Dr Hamid had personally engaged FBP, and that any extrinsic evidence to the contrary was irrelevent. The principal reasons were as follows:
  • The letter. The sole letter evidencing the contract contained no indication that Moon Furniture was a company. Dr Hamid did not describe himself as “director”. A reasonable person analysing the letter objectively would conclude that Moon Furniture was Dr Hamid and that he used the pronoun “we” when writing as Moon Furniture. In short, Dr Hamid signed the letter without making it clear that he was not contracting personally.
  • Extrinsic evidence: actual knowledge. FBP were not told that the client was a company. They were merely told that Dr Hamid was the owner of the Moon Furniture business.
  • Extrinsic evidence: publicly available information. Extrinsic evidence existed to show that Moon Furniture was the trading name of Chad. However, the defendants were unaware of that evidence. Where the issue is whether someone contracted personally or as agent, there is not to be imputed to the other party knowledge that he did not have. Therefore the extrinsic evidence was irrelevant.
FBP appealed to the Court of Appeal.

Decision

The Court of Appeal confirmed the decision of the High Court, relying essentially on the same reasoning.
Jackson LJ reviewed the main cases on identity and the capacity in which a party enters a contract, from which he drew the following principles:
  • Where a question arises as to the identity of a party referred to in a deed or contract (which turned out not to be an issue here, see below), extrinsic evidence is admissible to assist the resolution of that issue.
  • In determining the identity of the contracting party, the court’s approach is objective, not subjective. The question is what a reasonable person, furnished with the relevant information, would conclude. The private thoughts of the protagonists concerning who was contracting with whom are irrelevant and inadmissible.
  • If the extrinsic evidence establishes that a party has been misdescribed in the document, the court may correct that error as a matter of construction without any need for formal rectification.
  • Where the issue is whether a party signed a document as principal or as agent for someone else (that is, a question of capacity rather than identity), there is no automatic relaxation of the parol evidence rule. The person who signed is the contracting party unless (a) the document makes 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.
The court identified the crucial question in this case as one not of identity, but capacity, that is, whether Dr Hamid was (a) contracting personally or (b) signing the letter as director of, alternatively agent for, Chad.
The Court of Appeal was in no doubt that Dr Hamid did not effectively qualify his signature or make it plain that the contract did not bind him personally. The mere reference to Moon Furniture, without any indication that it was the trading name of Chad (or indeed any company), was not an effective qualification.
The Court of Appeal considered evidence outside the contract documents. Key findings included the following:
  • At no stage before the contract was concluded did anyone tell the engineers that Moon Furniture was a limited company. Although one of the FBP partners apparently made an assumption to that effect, the court concluded that his private thoughts were not relevant or even admissible in evidence.
  • If the engineers had made inquiries, they probably would have ascertained that Moon Furniture was the trading name of the company. However, the court held that enquiries which could have been made but were not made were irrelevant.

Comment

In retrospect the result in this case may seem obvious. As the court pointed out, the same principles would have applied had Dr Hamid been trying to argue that the company was the contracting party (for example, in order to escape personal liability to pay), or had the company attempted to sue for breach of contract (perhaps because it had suffered loss due to the showroom not being ready in time). In both cases any argument that the company was the correct contracting party seems more obviously untenable. Nevertheless, this case is noteworthy because of the concise summary by the Court of Appeal of case law on the approach to identifying the contracting parties and the capacity in which they sign.

Case

Hamid v Francis Bradshaw Partnership [2013] EWCA Civ 470, 2 May 2013, Rix, Jackson and McCombe LJJ.
End of Document
Also Found In
Resource ID 3-528-5765
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Published on 16-May-2013
Resource Type Legal update: archive
Jurisdictions
  • England
  • Wales
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