Case law: Inaccurate company details in contract led to avoidable dispute
Businesses should ensure they accurately record the parties' correct names and (for limited companies) their registered numbers in their commercial contracts. This is necessary to avoid unnecessary legal proceedings where there are other entities with similar registered and/or trading names.
This update was published in Legal Alert - October 2016
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A housing society entered into a contract with a contractor under which the contractor would build houses and flats. The contractor brought in a sub-contractor to provide heating systems. As part of the transaction, the housing society was given a subcontractor's 'collateral warranty'. This was purportedly given by a company called Active Sustainable Energy Solutions Limited which, the warranty said, was registered at Companies House under number SC323476.
The systems installed were not to spec so the housing society sought to enforce the warranty. However, it then discovered:
- There was no limited company registered with the name Active Sustainable Energy Solutions Limited
- There was a limited company called Active Air Conditioning Limited ('AAC'), which used the similar name Active Sustainable Energy Systems as a trading name. It was this company that had carried out the work as a sub-contractor
- However, AAC had also registered a subsidiary limited company with the name Active Sustainable Energy Systems Limited ('ASES') – and its registered number was SC323476. ASES was a dormant company that had never traded and, at the time the society wanted to enforce the warranty, had gone into liquidation
- The managing director of both AAC and ASES was the same person and the registered office of both companies was at the same address
AAC claimed that the warranty had been given by company number SC323476 (ASES) but that company was in liquidation and had never traded anyway, which meant the warranty would not be discharged. Unsurprisingly, the society asked the court to rectify the warranty to say that liability rested with AAC.
The court took a number of factors into account in deciding that the parties' intention was that the warranty be given by AAC. However, it only made this ruling on the specific facts. In other circumstances, the housing society's failure to check the accuracy of the other party named in the warranty in the first place could have cost it dearly.
- Businesses entering into commercial agreement should be crystal clear exactly who the intended parties to the contract are, particularly where there are other entities with similar registered and/or trading names, and ensure the parties' correct names and (for limited companies) their correct registered numbers are set out in the contract
Case ref: Albyn Housing Society Limited v Active Air Conditioning Limited  ScotCS CSOH_110
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.