Case law: Parties to an agreement lose out because it was unclear who they were contracting with
A party to a legally binding agreement, however informal the circumstances, should ensure they know exactly who they are contracting with, otherwise they may be unable to recover compensation or pursue any other remedy if things go wrong, as a recent case shows.
This update was published in Legal Alert - October 2018
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A couple commissioned an extension to their house. Their agreement was made orally with an individual they knew through their business. They were unhappy with the quality of the work and how slowly it was being done, but made payments until their patience ran out, at which point they purported to terminate the agreement. The extension remained unfinished, so they claimed compensation from the individual with whom they made the agreement.
However, the individual claimed that the agreement had not been made with him personally – he had made it on behalf of his limited company. Unfortunately, the company had gone into administration by this time and had no money.
The Court found the evidence from each side about the circumstances in which the agreement was made, what was agreed, and so on, was "vague, contradictory and unsatisfactory".
However, it found that the individual had never traded in his own name. He had started as a sole trader using a trading name, and later formed a limited company and traded through that. When he formed his company, he had leased vans, printed cards and advertised, in the name of the company.
The couple admitted that the day-to-day work was usually done by employees using vans with the company logo on it, and the individual himself was rarely there. They also admitted receiving a letter from their own solicitor referring to their agreement with the limited company.
On these findings, the Court ruled it was "highly improbable" that the couple did not know the individual traded through a limited company, so that they were in fact contracting with the company - and not the individual personally.
- A party to a legally binding agreement, however informal, should ensure they know exactly who they are contracting with, otherwise they may be unable to recover compensation, or pursue any other remedy, if things go wrong
Case ref: Bain v Martin  CSOH 83
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