With the ever increasing use of and reliance on emails and other forms of informal communication handled on a rushed basis during a hectic negotiation process, it is common occurrence for such informal business dealings to result in agreements that are partly oral, partly written, and in various forms. This, in turn, can lead to difficulties should the contractual relations break down and result in litigation. A pause for thought and attention to details can prove to be most prudent.

An example of the foregoing is presented by a recent decision from the Court of Appeal for England and Wales, Hamid v Francis Bradshaw Partnership, [2013] EWCA Civ 470. The claimant, Dr. Hamid, was the director and sole owner of a limited company, Chad Furniture Store Ltd, which in turn operated a furniture business under a trading name, Moon Furniture. His status as owner of this company was a matter of public record. However, in entering into a contract regarding a new furniture showroom for his business, Dr. Hamid throughout his discussions and dealings with the defendant used and signed his own name and also used the email and trading name of his business rather than its corporate name. The defendant asserted that in entering into the contract it believed that it was dealing with the claimant’s limited company and not the claimant as an individual. The tactical reason for this defence was that if the company were joined or substituted as claimant, it could be argued that it had suffered no loss because it did not own the subject property that had been allegedly damaged by improper design and construction. The first instance court as a preliminary issue held for the individual claimant, Dr. Hamid, and the Court of Appeal had to decide whether the individual or his limited company was the contracting party.

In reaching its decisions to dismiss the appeal, the court explained the following key principles:

  • Where an issue arises as to the identity of a party referred to in a deed or contract, extrinsic evidence is admissible to assist the resolution of that issue.
  • In determining the identity of the contracting party, however, the court's approach is objective, not subjective. The question is what a reasonable person, furnished with the relevant information, would conclude. The private thoughts of the protagonists concerning who was contracting with whom are irrelevant and inadmissible.
  • If the extrinsic evidence establishes that a party has been misdescribed in the document, the court may correct that error as a matter of construction without any need for formal rectification.
  • Where the issue is whether a party signed a document as principal or as agent for someone else, there is no automatic relaxation of the parol evidence rule barring testimony at variance with the writing. The person who signed is the contracting party unless (a) the document makes clear that he signed as agent for a sufficiently identified principal or as the officer of a sufficiently identified company, or (b) extrinsic evidence establishes that both parties knew he was signing as agent or company officer.

These principles are relatively straightforward, and this decision might not be considered particularly noteworthy in applying them to the facts of this case. However, the Court of Appeal acknowledged that whether a party has been 'sufficiently identified' hinged on whether there was merely an inconsequential misdescription of the entity on behalf of whom the individual was signing.

In this case, the dispute over Dr. Hamid’s signing capacity resulted in protracted and likely expensive litigation. It should serve as a reminder that attention to details and formalities during contract formation are important for reasons that may not be apparent at the time, and that lapses in the course of fast-paced everyday dealings can have unanticipated, adverse consequences down the road. It remains true that a ‘stitch in time saves nine’.