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Court of Appeal holds that contract signed by a buyer on behalf of himself and his wife without her authority was valid, but only bound him alone

Hilary Coles
3rd June 2016
The Competition and Markets Authority issued its decision today finding an infringement of Chapter I of the Competition Act 1998 and / or Article 101 of the Treaty on the Functioning of the European Union by ITW Limited (“ITW”), a global manufacturer of specialised industrial equipment and consumables. The infringement relates to the supply of commercial catering equipment, specifically ITW’s Foster Refrigerators between 2012 and 2014.
In the case of Marlbray Ltd v Laditi and another [2016] EWCA Civ 476, on 24 May 2016 the Court of Appeal considered the validity of a contract where the signatory did not have the authority to sign on behalf of his wife.

The husband (H) attended a developer’s sales fair and retained one of the law firms attending the fair to purchase a property in an apart-hotel development signing a contract naming himself and his wife as joint purchasers. H paid a reservation deposit (and later a further deposit of 25% of the purchase price) and contracts were exchanged that day. H’s wife (W) spent most of the day outside of the sales fair looking after the couple’s children. After exchange of contracts, the balance of the purchase price could not be raised and the developer therefore rescinded the contract and forfeited the deposit.

In October 2015, the first instance judge found that the contract was not “valid and enforceable” because W had paid little attention to the fair’s events, had not instructed the solicitors, signed the contract nor authorised her husband to sign it on her behalf, and had not subsequently ratified the contract.

The Court of Appeal, considering the developer’s appeal of the first instance decision, allowed the appeal in part. In particular, the trial judge had relied on the case of Suleman v Shahsavari [1988] 1 WLR 1181 as authority for the proposition that, as H had no authority to sign on behalf of W, there could be no binding contract. However, the Court of Appeal distinguished this case from Suleman on the basis that, in Suleman, there was no possibility of either Mr or Mrs Suleman, as joint owners, being in a position to convey the property individually. Conversely, in this case, the contract H signed provided that “where 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” and therefore, given this express provision of joint and several obligations, there should be no reason why the several obligations of H should not be contractually binding. As such, H was bound by the contract but W was not.

The Court of Appeal also considered whether a binding contract could arise between the developer and H if it was intended that W would also be a party to the contract. It was held in this respect that there was no universal rule that a valid contract of sale could never come into existence between a vendor and purchaser where it was intended at the time of signing that there would be two purchasers but the second purchaser never signed the contract. Whether there was a valid contract depended on the common intention of the parties and whether the first purchaser’s agreement to execute the contract was expressly or impliedly conditional upon the second purchaser signing it. In this case there was no evidence that H had contracted purely on the basis that W would be a joint purchaser.

Finally, the Court of Appeal dismissed H&W’s argument that the contract did not comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 which provides that a contract for the sale of an interest in land must inter alia be signed “by or on behalf of each party”. It would make a mockery of the policy behind section 2 of that Act if it could be construed so as to enable H to escape his several obligations under the contract when the failure to obtain W’s authority was entirely his.

The decision highlights the importance of practitioners taking clear instructions from all of their clients. Likewise, one party to a couple should not assume that they have the authority to bind their partner.

Maitland Walker LLP has an experienced residential property practice headed by Hilary Coles. For further information or advice on Residential Property, please contact Hilary or Melanie Holder. For information on Litigation and Dispute Resolution, please contact Julian Maitland-Walker or Sheree-Ann Virgin.

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