Knowing who you're in contract with

The new showroom building was being built for Chad Furniture Store Ltd. Or was it for Moon Furniture? Maybe it was for Dr Hamid? Or was it perhaps for Hamid Properties? Anyway, it met a snag. The sloping site had a row of terraced houses as the near neighbour uphill of the new building. No matter - a piled retaining wall should do the trick. It didn’t. So after a lot of thinking and delay, a second retaining wall was started.

It’s not absolutely certain that these endeavours, all told, went too well. Can you see trouble brewing? The story is a familiar one - it’s not about the retaining wall, but about who is in contract with whom. It happens frequently. It’s a messy business.

Dr Muner Hamid is the sole director and sole shareholder of a company called Chad Furniture Store Ltd. It sold furniture. It traded as Moon Furniture. Has done for umpteen years. Dr Hamid conducted business personally as Hamid Properties, as well as via his company Chad Furniture Store Ltd, which traded as Moon Furniture.

Do you see what I mean by messy?

Dr Hamid conducted business personally as hamid properties, as well as via his company chad Furniture Store Ltd, which traded as Moon Furniture. Do you see what I mean by messy?

And when it came to this construction contract he first engaged an architect then later a firm of engineers then a construction company. It’s the contract with the engineer that is in the spotlight. It is evidenced by a letter headed Moon Furniture and set out the engineer’s fee for the work; and is signed by Dr Hamid. I have already told you that Moon Furniture is the trading name of Chad Furniture Store Ltd.So, what about the retaining wall problems? Dr Hamid maintained he had suffered substantial losses over the events and commenced proceedings claiming damages. The defendant engineer denied liability and pleaded he had no contract with Dr Hamid. The engineer said that his contract was with Chad Furniture Store Ltd (Chad). And if that is the correct analysis of who is in contract with whom, the engineer was on a winner. The reason is that if the property damaged was not owned by Chad, then that company suffered no loss at all. The engineer was not in contract with a person suffering the loss to property. The preliminary issue at the trial was whether the engineer was engaged by Dr Hamid or Chad. In law Chad is quite a different “person” to Dr Hamid. The contract is, on the letterhead Moon Furniture, but that can’t be Dr Hamid in person because that’s the trading name of the limited company.

The judge decided that the contract was with Dr Hamid in person. First, the engineer had no idea that their client was a limited company. The signature of Dr Hamid was not signed on behalf of anyone or anything. Detective work might have discovered that Moon was really a limited company, but company law doesn’t work that way. Whether someone contracted personally, or as agent, is not be to imputed to the other party by way of knowledge that he does not have.

The engineer was aggrieved by the judge’s decision so came to the three-judge Court of Appeal. At the heart of the appeal is that with only minor effort the engineer could have discovered Moon was a mere trading name.

A quick look at Moon’s website would have been enough, or a look at the sign outside its old furniture showroom.

The Court of Appeal didn’t buy any of that.

The preliminary issue at the trial was whether the engineer was engaged by Dr Hamid or Chad. In law Chad is quite a different ‘person’ to Dr Hamid

The court said that if the letter of appointment written on Moon letter-head was actually written on behalf of Chad furniture Store Ltd it would completely fail the rules for company letterhead by having no reference to the limited company, nor is the registered office stated, nor is the company registration number and place of registration to be seen, nor does Dr Hamid’s name have “director” under his signature. All that amounts to, or would amount to, a criminal offence punishable by fines if it were a company.

So, said the Court of Appeal, the Moon letterhead was therefore non-company business. It was a contract in person and with the person who is prima facie entitled to make a claim for his contractual losses. Dr Hamid not Chad Furniture Store Ltd was in contract with the engineer. Mind you, I can think of many an instance where Dr Hamid would be better off contracting via a limited company. But not in this instance.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple