Continuing with the theme around contractual issues started in the last commercial update, a salutary lesson about making sure that you know who the contracting party is…
The case to focus on is Lumley v Foster & Co Group Ltd and others [2022] EWHC 54 (TCC) where the Technology and Construction Court grappled with the question of which, out of several potential defendants, was the contracting party to a construction contract.
The case concerned a residential homeowner who approached a builder she had seen named as ‘Foster & Co’ on an advertising flyer which had been delivered to homes in her area.
She met with Mr Foster and during the meeting, Mr Foster made assurances that he and his wife would be taking personal responsibility for the project. Mr Foster also made references to the Foster & Co Group and the Foster & Co brand, but did not mention any particular company.
The invoices sent were in the name of Foster & Co but the bank account into which money was paid was for a specific legal entity, of which Mr Foster was a director.
The parties then fell out as the works did not proceed as expected and the homeowner brought a claim for breach of contract, naming 6 different Defendants, including Mr Foster personally. Mr Foster responded that the contract was in fact concluded with his company, which had ceased trading and was in liquidation (which would effectively make the claim worthless).
The Court concluded that the contract was entered into between the Claimant and Mr Foster, who would then be personally liable in any successful claim for breach of contract. The Judge said that “the onus was on Mr Foster to make clear that he was not contracting in a personal capacity. In my judgment, he plainly did not do so in the course of the meeting on 21 June 2016.”
Key points to take away:
- Remember that when looking at an oral contract, the quote case law, “The question is what a reasonable person, furnished with the relevant information, would conclude” (Hamid v Francis Bradshaw Partnership [2013]).
- The parties usually are identified at the time the contract was concluded and remember that subsequent paperwork (such as the invoices in this case here), can be of limited evidential value;
- When someone signs a document, that person will be regarded as the contracting party unless they qualify the signature or otherwise make it plain that the contract did not bind them personally.
- If you do not make the other side of a contract aware of the correct contractual entity at the time of concluding the contract, you could be left with personal liability for any breach of the contract in the future.
- As ever, ideally any contracts (and their terms) should be agreed and recorded in writing before any work is started.
Regards to all,
Roger
