Getting to know you

23 June, 2016

18421535 - business woman with hand extended to handshake - isolated over whiteThe recent case of Marlbray Ltd v Laditi and another [2016] EWCA Civ 476 highlights the importance of knowing who your client is at the outset. 

 

The Court of Appeal considered whether a contract signed by a buyer (the husband) on behalf of himself and his wife without her authority was valid.  

 

At a sales fair a developer sold units in an “apart-hotel”.  The sales fair was attended by several law firms to represent prospective purchasers and exchange contracts.  The husband retained one of the law firms and signed a contract naming himself and his wife as joint purchasers.  He paid a reservation deposit and contracts were exchanged.  His wife spent most of the day outside the fair looking after their young children. 

 

After the husband had paid a further 25% deposit, the balance of the purchase price couldn’t be raised and the contract did not complete resulting in the developer rescinding the contract and forfeiting the deposit.

 

A judge found that the contract was not “valid and enforceable” because the wife had paid little attention to the fair’s events, had neither instructed the solicitors, signed the contract, nor authorised her husband to sign it on her behalf, and had not subsequently ratified the contract. 

 

On appeal by the developer, the court found that there was a valid and enforceable contract between the developer and the husband.  Subject to argument at trial on allegations of unconscionable bargain, penalty and issues concerning section 49(2) of the Law of Property Act 1925, the developer was entitled to retain the deposit.

 

Full details of the case can be found here.

 

It just goes to show that law firms should always ensure they obtain instructions from all clients and not make assumptions based on the relationship between the purchasers.