Are you still bound?
If A enters into a contract on behalf of A and B but A does not have B’s authority, is the contract still valid? This was the question which the Court of Appeal had to consider in the recent case of Marlbray Limited v Laditi and another.
Mr and Mrs Laditi attended a sales fair at which Mr Laditi entered into a contract to purchase a room in an “aparthotel” (a type of hotel providing self-catering apartments as well as ordinary hotel facilities). The contract named Mr Laditi and his wife as joint purchasers although only he had signed the contract. Mr Laditi paid a reservation deposit and later he paid a 25% deposit; however, he and his wife were subsequently unable to obtain a mortgage and therefore could not proceed with the purchase. The developer, Marlbray, terminated the contract for breach and kept the deposit.
Mr and Mrs Laditi took the developer to court and tried to recover the deposit on the basis that because Mr Laditi had lacked authority to sign on behalf of his wife there was no binding contract. The Judge found in favour of the Laditis. He held that the contract was not valid and enforceable because Mrs Laditi had not signed it or authorised her husband to sign it on her behalf and had not subsequently ratified it. The developer appealed.
The Court of Appeal reversed the decision and unanimously found for the developer. It said that a valid and binding contract had come into being as between Mr Laditi and the developer but not as between Mrs Laditi and the developer because of the absence of any authority for Mr Laditi to contract on her behalf.
Key to this finding was the fact that the contract which Mr Laditi had signed had expressly provided that: “When two or more persons constitute the Purchaser all obligations contained in this Agreement on the part of the Purchaser shall be joint and several obligations on the part of such persons”. Accordingly, the Court saw no reason why the obligations of Mr Laditi should not be contractually binding even if his wife was not bound. Mr Laditi was therefore required to purchase the property notwithstanding the fact that no contract had come into existence between the developer and Mrs Laditi.
This case serves as a useful reminder that when signing a contract on behalf of another, it is important to have written authority to do so in order to ensure that the contract is binding on them as well. It also highlights another fundamental concept of contract law: if a contract imposes joint and several liabilities on the parties to it then one contracted party can be held to perform the whole of the contract even if the other does not.
Partner and Head of Dispute Resolution
Commercial Dispute Resolution
LPatel@LawBlacks.com
0113 227 9316
@LukeLawBlacks
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Luke Patel
