The Court of Appeal has reiterated the principle that where a person signs a contract in their own name and with no qualification as to the capacity in which they sign, they will be a party to the contract – that is personally.
A contract for the sale of a Ferrari 250 GTO was agreed between the seller, Bernard Carl, and the buyer, Gregor Fisken who contracted via his corporate entity Gregor Fisken Limited (GFL). The sale price? A mere $44 million.
The car’s gearbox was in the possession of a third party. The contract provided that if Mr Carl was able to deliver the gearbox he would be entitled to a further $500,000. GFL wanted to inspect the gearbox via Ferrari in Italy but Mr Carl would not agree to the extra shipment costs. From there the situation deteriorated. Mr Carl alleged that GFL had repudiated the contract and therefore Mr Carl was no longer obliged to deliver the gearbox. GFL sought to enforce delivery of the gearbox by specific performance.
The contract of sale was concluded on or about 18th October 2017. Its heading described it as being made:
(1) Bernard Carl of 46 Chester Square, London SW1W 9EA (‘ Seller‘); and
(2) Gregor Fisken Limited of 14 Queen’s Place Mews, London SW7 5BQ (as agent for an undisclosed principal) (‘ Buyer ‘)
In English law the term “undisclosed principal” refers to a principal whose existence is not disclosed. Strictly, where the fact that a party is acting as agent is disclosed, but the identity of the principal is not, the principal is referred to as an unidentified principal.
The contract concluded:
“As Witness the hands of the Parties the day and year first above written.
Signed by: Bernard Carl
Signed by: Gregor Fisken Limited
The contract was signed by Mr Carl against his name and by Mr Fisken against the name of GFL. The signature of Mr Fisken was unqualified, with nothing to indicate that he signed only as an agent.
The Court of Appeal re-examined a long line of authority. It concluded that, despite being described in the heading of the contract as “agent for an undisclosed principal”, GFL’s actual signature was unqualified and the inconsistency should be resolved in favour of the signature block. Accordingly, GFL was entitled to enforce the contract.
While this case smells of a legal battle between two rich people that was unnecessary, the fact remains that The Court of Appeal have confirmed once again that it is of crucial importance to ensure that who you want to be a party to the contract actually signs.
It impacts on every business person signing a contract. It is imperative to ensure that if you want the contract in your limited company that the contract is signed by the limited company – not you as a director personally.
A contract with a limited company should say SIGNED BY YOUR NAME ACTING AS DIRECTOR FOR AND ON BEHALF OF YOUR LTD or something along those lines, and if it doesn’t, then change it before you sign. Otherwise, you could find yourself with potential personal liability.