A recent High Court decision highlights the importance of being clear about the parties to a contract.
When a customer brought a claim for defective building works against six difference defendants, the Court had to consider which of them had entered into the contract.
The builder tried to argue that the contract was with his company which had gone into liquidation, which would make the claim worthless. However, the parties had no written contract and the builder had made no mention of any corporate entity during his meeting with the claimant at her home.
The Court held that the parties to a verbal contract are identified using an objective approach – i.e. what the reasonable person would conclude. Any matters which take place after the contractual agreement is concluded – for example, as in this case, invoices sent to the claimant in the name of a limited company – are of limited relevance.
The Court concluded that Mr Foster had entered into the contractual agreement, so he was personally liable for breach of contract.
We always recommend that contracts are put in writing, and those acting on behalf of a corporate entity should document this at the time of entering into the agreement. Failure to do so can result in the contracting party becoming personally liable.
TAKE CARE....OR YOU COULD BE HELD PERSONALLY LIABLE FOR A BREACH OF CONTRACT
Construction contracts are often signed by an individual on behalf of a corporate entity. But it is not uncommon within the construction industry that an individual may wear a number of different hats in relation to a number of different entities or use different trading names for the provision of different services.
In the absence of a written, signed contract, with a clearly defined legal entity, it is not always clear as to who is the contracting party.
In Lumley v Foster & Co Group Ltd and others  EWHC 54 (TCC) the Technology and Construction Court grappled with the question of which, out of a number of potential defendants, was the contracting party to a construction contract.