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A warning for directors when signing documents

28 November 2013

Category: Press releases, Commercial, Dispute resolution

In the case of Hamid v Francis Bradshaw Partnership (FBP), Hamid was the director of a company, Chad Furniture Store Limited (Chad), trading as Moon Furniture. He signed a contract with FBP, who understood that Hamid owned Moon Furniture, which indirectly was true.

The contract included a letter written under the name of Moon Furniture and included its website URL, email and address. Hamid signed the document, above his typed name and Moon Furniture was typed directly below. There was no indication Hamid may be signing as a director on behalf of Chad. FBP was unaware of Chad.

The case went to the Court of Appeal which held that Hamid did not effectively qualify his signature or make it clear that the contract did not bind him personally. The mere reference to Moon Furniture without reference to Chad, the company (or indeed any company), was not an effective qualification. The court found that Hamid had signed on his behalf, and not for the company. He was therefore personally liable for the terms of the contract.

This case highlights that directors should be vigilant when signing documents, especially contracts, and provides a useful reminder that the parties to a contract should always be clearly identified.

When a company operates using a trading name, directors should take care to clearly identify the company and that they are signing on its behalf (and not personally). Otherwise, directors may face personal liability.

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Paul Gordon LLB
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