Greg Standing looks at the pitfalls of document signatures and headed notepaper.
When motor finance companies seek to enforce finance agreements, it’s essential to know not only the identity of the person signing the contract, but also the capacity in which it was signed. This is especially so where the lack of assets to enforce against is an issue.
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The Court of Appeal recently dealt with the capacity of a contracting party in Hamid v Francis Bradshaw Partnership (FBP). Hamid was the sole director and shareholder of a limited company (C) that traded under the name Moon Furniture. A contract was entered into which was partly evidenced in writing by a letter giving Moon’s address and details and signed by Hamid directly above the words "Moon Furniture". Had Hamid contracted as an individual, or as an agent for, or director of, C?
FBP alleged that Hamid signed the letter on behalf of Moon and therefore the contract was concluded by whatever entity traded under the name Moon, i.e. C. On that basis, Hamid had no claim against it as there was no contract with him.
Certain information has to be included by companies in their business correspondence. This includes the company’s registration number, place of registration, registered office address and the fact that it is a limited company if its name does not reflect this.Failure to comply can lead to a fine against the company and its directors.
None of the above requirements were contained in the letter signed by Hamid. It gave no indication that Moon was the trading name of a limited company or that Hamid was a director of any company.
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By GlobalDataWhere capacity is in issue, the court confirmed that the person who signs the contract is the contracting party, unless the document makes it clear that: it is signed as an agent for an identified principal; or as an officer of a company; or that extrinsic evidence establishes that both parties knew it was being signed as an agent or company officer.
The evidence here indicated that FBP assumed it was contracting with Moon, which it believed to be a limited company (although it was never told this), but that FBP had no knowledge of C or any link between Moon and C. The fact that the connection could have been ascertained from publicly available information was irrelevant because FBP was unaware of that information. The court would not impute knowledge to FBP that it did not have.
There was no qualification of Hamid’s signature. The reference to Moon without any indication that it was the trading name of C was not an effective qualification. Hamid was contracting in his own right and could therefore bring the claim.
Comment
The capacity in which a party signs a document is a question of fact and interpretation of the document in question. Finance companies might find this judgment useful when faced with an individual attempting to escape personal liability by arguing that a finance agreement was signed on behalf of a company, not in a personal capacity. The same arguments would apply in that situation.
Greg Standing is a partner in Wragge & Co’s motor finance litigation team
