The recent Court of Appeal decision in Muneer Hamid v Francis Bradshaw Partnership again highlights the strict rules governing the interpretation of written contracts under English law and reiterates the significance of the long-established common law parol evidence rule. The court held that a company director had contracted in his personal capacity rather than through his company when he signed his name on a letter bearing the trading name of his company. Whilst individuals usually argue that they should escape contractual liability by sheltering behind a company name, in this matter the claimant had successfully argued the other way. The case serves as a stern reminder of the need to observe execution requirements, so that those intended to join as parties to a contract do in fact so join.

The claimant, Dr Muneer Hamid, had been the sole director and sole shareholder of Chad Furniture Store Limited (the “Company”), a UK furniture business trading under the name “Moon Furniture”. In 2003, Dr Hamid had purchased a property in his own name. He had intended to transfer the furniture business to that location and had asked the defendant firm of engineers, Francis Bradshaw Partnership (“FBP”), to carry out some construction work on the new site. The written terms of engagement were contained in a letter dated 10 March 2004 (the “Letter”). The Letter, addressed to FBP, had been written on notepaper headed “Moon Furniture”. Dr Hamid’s signature appeared at the foot of the Letter, immediately above his printed name and the words “Moon Furniture”.

The engineering work soon proved to be flawed. Dr Hamid sued FBP and claimed he had suffered substantial losses. FBP denied liability. It pleaded that it had not entered into a contract with Dr Hamid, but had instead been employed by the Company that had suffered no loss because it was not the property owner.

In a trial on the preliminary issue of establishing who the contract parties were, the first instance judge held that Dr Hamid had been acting personally rather than as agent for the Company. The Letter had contained no indication that “Moon Furniture” was a limited company nor that Dr Hamid had been a director of the same. Instead, a reasonable person would have concluded that Moon Furniture was in fact Dr Hamid.

FBP appealed to the Court of Appeal. FBP contended that on an objective analysis, Dr Hamid had sent the Letter on behalf of whatever entity traded under the name of “Moon Furniture” and that therefore the Company had been FBP’s client.

Lord Justice Jackson disagreed. He upheld the earlier decision and dismissed FBP’s appeal. He reiterated the importance of the parol evidence rule which for more than two centuries has been a fundamental aspect of English common law. The rule provides that where there is a written contract, oral evidence cannot be received to add to, subtract from or vary the written terms. In the present matter, Dr Hamid had not explicitly signed as “director”. Quoting the judgment in Internaut Shipping GmbH v Fercometal SARL [2003] EWCA Civ 812, Lord Justice Jackson reinforced that if a signatory to a contract “wished to be regarded as not binding himself under it, then he should qualify his signature or otherwise make it plain that the contract does not bind him personally”. Lord Justice Jackson held that where an issue arose as to the identity of a party referred to in a contract, extrinsic evidence was admissible to assist the resolution of that issue. However, the court’s approach should always be objective, not subjective. He said:

"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. 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.”

FBP had not been aware that Moon Furniture was a limited company. In construing the contract, Lord Justice Jackson was not willing to take into account matters which KBP might have discovered but did not in fact so discover. The judge held that the central issue was not one of identity but of capacity, i.e. whether Dr Hamid had been contracting personally or as a director of, or agent for, the Company. The judge concluded that Dr Hamid had himself become a contracting party unless “he qualified his signature or otherwise made it plain that the contract did not bind him personally”. The mere reference to “Moon Furniture”, without any indication that this was the trading name of the Company or indeed another limited company, was not an effective qualification. The fact that FBP may or may not have known that this was the Company’s trading name was irrelevant because any such subjective thoughts were inadmissible in evidence.

This decision once again reinforces the strict rules on contract interpretation under English law. It also serves as a reminder of the need to ensure that contract execution requirements are complied with and that each party should satisfy itself of the rightful capacity of all signatories concerned.

Court of Appeal of England and Wales (Civil Division), decision dated 2 May 2013 – Muneer Hamid (t/a) Hamid Properties) v Francis Bradshaw Partnership [2013] EXCA Civ 470

Stefanie Slapke, Solicitor (England & Wales)