Director Personally Liable for Contract

A sole director and shareholder found himself personally liable on a contract he had made for engineering work on land owned by his company because he had failed to make it clear to the engineers that he wanted them to contract with his company.

The Court of Appeal decided, in the case of Hamid V Francis Bradshaw Partnership 2013, that the engineers could have found out that person they were dealing with was acting for his company and not personally, but that it was not their responsibility to make the enquiry. It was the individual’s responsibility to make the position clear.

This was not a formal written contract situation. The arrangements for the work had been negotiated and the cost agreed. The director then wrote to confirm the arrangements using a letter headed with the trading name used by the business. Unfortunately there was nothing to show that the trading name was used by his limited company and not by him personally.

Limited companies are required by law to have specific information on all their formal paperwork (such as letterheads, e-mails and invoices). It is also essential for significant building projects to be supported by a formal building contract for the protection of all parties. If Dr Hamid had followed these simple rules then he would have avoided personally liability (and presumably all of the costs and fees in taking a claim all the way to the Court of Appeal!).

For more information on company law requirements or for assistance with formalising building or other contracts please contact Partner and Head of the Commercial Department, Gillian Jones.

 
 
 

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