The English Court of Appeal in the recent case of Marlbray Ltd v Laditi and another (2016) EWCA Civ 476 held that a contract which named husband and wife as the purchasers, entered into without the wife’s consent and signed only by the husband, was valid even though the husband had no authority to contract on the wife’s behalf.
Dr Laditi (“Husband”) attended a developer’s sale fair and signed a contract for the purchase of real property naming himself and his wife, Mrs Laditi (“Wife”) as joint purchasers. The Wife was unaware that the Husband had entered into a contract. There was a term in the contract which provided that “Where two or more persons constitute the Purchaser all obligations contained in this Agreement on the part of the Purchaser shall be joint and several obligations on the part of such persons”. Husband paid the deposit and the contracts were exchanged.
The Husband could not raise the balance of the purchase price and the contract did not complete. The developer rescinded the contract and forfeited the deposit.
The Husband sued for the return of the deposit from the developer.
Whether a contract signed by the Husband on behalf of himself and purportedly on behalf of the Wife, was “void”, “invalid” or “unenforceable” because the Wife never gave authority to the Husband to sign the contract on her behalf?
At first instance, the English High Court judge relied on the case of Suleman v Shahsavari (1988) 1 WLR 1181 and held that there was no binding contract with the purchasers as the Wife had not instructed the solicitors, nor given express authority to the Husband to execute the contract on her behalf, and had not subsequently ratified the contract.
The developer appealed against the findings of the High Court judge.
Taking a very different approach from the High Court, the English Court of Appeal allowed the appeal in part. The Court of Appeal held that a valid and binding contract had arisen between the developer and the Husband, but not as between the developer and the Wife because the Wife had not given authority to the Husband to sign the contract on her behalf.
The rationale of the Court of Appeal’s decision was that there was a term of the contract which provided that the obligations of the Husband and the Wife were joint and several. Accordingly, in view of this provision, the Husband remained contractually bound under his several contract with the developer, despite the fact that no contract came into existence as between the developer and the Wife.
This case highlights that a multi-party contract imposing joint and several liability can be severed if the validity of a contract is called into question as against one or more, but not all parties. Such legal principle is worth noting, and is likely to be followed by the Hong Kong courts in the future.
Also, where a party to a contract comprises more than one person, any one of such party should not assume that he/she has the authority to bind the other(s).