How can you be bound by something you haven’t even signed?
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How can you be bound by something you haven’t even signed?
At first glance it’s almost a nonsensical question as there surely must be no circumstances under which a person can be bound by something he hasn’t actually signed. However, if you take a step back and consider how businesses use agents, then it is actually very common for an agent to bind a business where an agent signs on behalf of the business. It therefore comes down to a question as to whether the agent had sufficient authority in order to bind the principal.
This point was recently considered in the case of Gordon James Ramsay v Gary Love [2015] EWHC 65 (Ch). The facts are well known, but are worth repeating. Gordon Ramsay (GR) had left the management of his business empire to Gary Love (GL) who was his father in-law. A dispute then arose as to whether GL had authority to commit GR to a personal guarantee using a signature machine. The judge found on the evidence that the parties’ long relationship was one of total trust (strengthened by their family ties) and that GL “plainly had extensive authority” to act on GR’s behalf in relation to the personal guarantee and that GR did not expect GL to keep him informed of the details of the business transactions, and that GR knew that he was not being kept informed.
The court also found that GR had previously given similar contractual undertakings through GL, and there were no express or specific limitations on GL’s ability to deal with any business or contractual matters. Therefore the High Court held that GL had sufficient authority to enter into a personal guarantee and indemnity on the principal’s behalf, based on the parties’ twenty-year working relationship and previous course of dealings. In short, GL had not exceeded his authority and GR was therefore bound by the personal guarantee.
The practical points to take from the case are that:
- principals should create a clear record of the scope of their agents’ authority in order to avoid and/or manage similar disputes; and
- signature machines can effectively bind a party to an agreement if there was appropriate authority to use it.