CONSTRUCTION JOURNAL

The importance of company identification in written contracts

A failure to clearly identify a company when entering into a contract can lead to confusion and uncertainty

Author: Shy Jackson

06 February 2020

There are many benefits to operating through a limited company, but it is important to ensure that such a company  is clearly identified when entering into  a contract. A failure to do so can lead to confusion and uncertainty, as can be seen in the two following cases.

In Erith Holdings Ltd & Ors v Murphy [2017] EWHC 1364 the court considered a claim based on an alleged oral contract with Mr Murphy in which he agreed to pay for certain waste removal services, for which he would also supply a personal indemnity or guarantee. The claim involved discussions with Murphy for the purchase of his business, Murphy's Waste Limited, a company that then went into liquidation.

The parties agreed that none of the oral agreement was put in writing and therefore the court had to determine the issues in dispute based on witness evidence as to what happened in the context of the contemporaneous documents. The court found that there was an initial agreement in place, but with Murphys Waste Limited. Invoices were issued to Murphy's Waste Limited that then made the payment, which indicated the agreement was with the company despite Murphy himself providing the funds for payment.

The court decided that a revised agreement had not been entered into, although it had been the subject of lengthy discussions. It was not credible that an agreed increase in costs of up to £1m would be left unrecorded and not communicated to the project funders or the solicitors involved in the negotiations. The court also rejected the argument that Murphy agreed to give a personal guarantee, noting that while he provided substantial financial support to the company, the funds were always channelled through the company. There was also no evidence that Murphy had paid any of Murphy's Waste Limited's debt's directly or given a personal guarantee for its debts.

In Williams Tarr Construction Ltd v Anthony Roylance Ltd & Anor [2018] EWHC 2339 there was a written contract that governed the appointment of civil engineer Anthony Roylance by contractor Williams Tarr Construction Ltd. However, it was reached through an exchange of emails and not recorded in a formal document. The installation of a retaining wall had proved to be problematic, which led to the alleged claim that the final design was defective.

The main contractor argued that Mr Roylance had acted in a personal capacity and that he had designed the wall and warranted it would be fit for purpose. The claim was brought against Anthony Roylance Limited as the first defendant and Anthony Roylance as the second defendant.

There was evidence that the main contractor was not aware that Roylance had a limited company and that correspondence was addressed to the same details as set out in his letter-headed paper, which made no reference to a limited company. The documents also suggested that Roylance was working in a private capacity as communications were sent to his personal email.

The court accepted that Roylance paid the fees into the company's account and regarded himself as operating through the company. This, however, had not been explained to the contractor and the company had not been referred to. Roylance had decided that his paperwork would look more professional if it made no reference to the company. The court held that the agreement was with Roylance in his personal capacity, but found that the scope of the agreement did not cover the design of the wall – so the claim failed.

These decisions demonstrate the benefits of acting through a limited company. Murphy operated in that way and therefore the allegation that he agreed matters in his personal capacity failed, but Roylance did not use his limited company and was found to have entered into the agreement in a personal capacity. In both cases, however, the need to decide which party entered into the contract would have been avoided if there had been a written contract in place, identifying the limited company by its full name, number and registered address – as is common practice.

Shy Jackson is partner at Pinsent Masons  shy.jackson@pinsentmasons.com

Related competencies include: Consultancy services

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