In order to enter into a legally binding contract, the first and perhaps most important step is to correctly identify who or what you are contracting with. That might sound easy but, as a High Court case recently reviewed by David Watson showed, it is crucial to bear in mind that companies have legal personalities separate from their owners or directors.
A builder launched adjudication proceedings against a restaurateur, claiming to be owed over £160,000 in respect of demolition and shopfitting works. The adjudicator declined jurisdiction to consider the matter, however, on the basis that the builder had not contracted with the restaurateur but with his limited company.
After the builder sought a binding judicial decision as to the identity of the party with whom he had contracted, the Court noted that his quotation for the works had been addressed to the restaurateur personally. When the restaurateur agreed by email to the works proceeding, he gave no indication that he was acting as his company’s agent.
Negotiations in respect of the works started before the company was incorporated and the Court found that the restaurateur had at no point prior to completion of the contract made it known to the builder, on a clear basis, that he was contracting as or on behalf of his company. The Court concluded that the contract was between the builder and the restaurateur in his personal capacity.
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