Director Ends Up Personally Liable After Unclear Contract Conditions - What You Need to Consider When Drafting a Contract
One of the key points in any contract is to identify who are the parties to the contract. In this case, it all went horribly wrong for the director, as he ended up personally liable.
Facts
In the case of Savills (UK) Ltd v Blacker and Sidemanor Limited, Sidemanor wanted to sell its estate. Blacker, a director of Sidemanor, decided that the best way of achieving this would be to obtain planning permission and for Blacker to buy a cottage that had previously been transferred outside of the estate. Savills were appointed as estate agents. Savills prepared a marketing report with clear recommendations including obtaining planning permission, and Savills attached its standard terms of business to the marketing report.
The first marketing report was never signed, but it was updated to take account of some changing circumstances (including the appointment of Knight Frank as another estate agent as well as Savills) and Blacker signed the updated marketing report. With the report, a statement said: "I confirm my instructions to proceed with the sale and marketing of the Estate in accordance with this report and the attached Terms of Business."
Unfortunately, the report did not make clear who was the client, and Blacker's signature did not describe in what capacity he was signing.
A purchaser of the estate was found, but not with Savills' assistance. Savills still claimed its commission in accordance with the report and its Terms of Business. However, Blacker argued that the sale had not been made in accordance with the report as the sale had been made without the planning permission referred to in the marketing report. There was also a dispute over who Savills could sue, as Blacker argued that he signed only as an agent for Sidemanor, but Savills said that he could be sued too.
Court of Appeal Decision
After a County Court judgment that went in favour of Blacker and Sidemanor, the Court of Appeal has reversed that decision.
It decided that the strategy around planning permission mentioned in the marketing report was only a recommendation. Commission was still payable to Savills in accordance with the contract.
Worse still for Blacker was that both he and the company, Sidemanor, were jointly and severally liable. Both were deemed to be clients of Savills. The instructions to Savills had related to the estate as a whole, and the signature by Blacker had not been qualified in any way. The Court said that the signature without qualification was likely to create personal liability, but this was only a starting point and it was necessary to look at the whole agreement and any surrounding circumstances to decide upon the signatory's capacity. The report had not clearly identified the client and Blacker had not expressly excluded personal liability. Without any contrary indication, the client would be the sellers as envisaged by the report, and both Blacker and Sidemanor were involved with the sale, so they were both liable.
Comment
Often, I see contracts where the parties' identities are not clear. This is essential and this case shows why. The individual signing should also be clear that they are signing for and on behalf of that entity rather than in any personal capacity, if they want to ensure they do not have personal liability.