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Are you Contracting Personally?

Directors and employees who sign and enter into contracts on behalf of their own or their employer’s company, often do so without considering whether they have taken steps to ensure they are contracting on behalf of the company and not in their own name.

In a recent Court of Appeal case (Hamid v Francis Bradshaw Partnership) the court confirmed that an individual, rather than the company, will become the contracting party if he fails to effectively qualify his signature or make it plain that the contract does not bind him personally. The contract in question was partly oral and partly written.

The main evidence was a letter which was headed with the trading name of a limited company, the postal address (which was the registered office address of the limited company) and the email and website addresses in the letter which both included ".co.uk".  However there was no reference to the name of the limited company anywhere in the letter, the address was not stated as being the address of its registered office nor was its registration number and place of registration stated.

The court decided there was nothing in the letter to indicate that the name was a trading name of the company, rather than the trading name of the individual. It is irrelevant that there was a failure by the other party to the contract to make enquiries which would probably have ascertained the name was the trading name of a limited company.

A company (including a company using a trading name) must clearly display its registered name, its registered number, its registered office address and which part of the UK in which it was registered (for example England and Wales) in all business correspondence. Failure to comply with the above trading disclosure requirements constitutes a criminal offence and renders the company, and every officer who is in default, liable to a fine. Furthermore it is essential both individuals and companies, when entering into contracts, ensure that the intended contracting parties are correctly stated.