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Be careful about who you allow to sign your contracts

Posted: 2nd June 2011   In: Corporate Commercial

A recent case in the High Court has highlighted the need for firms to keep a tight control on who signs contracts on their behalf.

It involved a recycling firm which found itself tied into a hire contract for three years when it thought the arrangement was only on a month by month basis.

The confusion arose when a landfill manager signed a contract on the firm’s behalf to hire a high-speed shredder. The contract contained a clause saying any disputes that might arise would be referred to an adjudicator.

The firm used the shredder until it was no longer needed and then gave one month’s notice to end the hire arrangement. The hire company insisted that the contract was for three years.

The adjudicator ruled in favour of the hire company so the matter was taken to the High Court. The recycling firm said the landfill manager was not an employee and had no authority to enter into a long term contract. He only had authority to enter into monthly agreements.

However, the High Court ruled in favour of the hire company. It held that the recycling firm must have been aware that its landfill manager had arranged for a significant number of machines to be hired and used at the plant.

There was no evidence to suggest that the hire company had been made aware that the manager did not have the authority to enter into long term agreements and therefore the three-year contract had to stand.

Please contact us if you would like more information about contract matters.