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Writing - s2 of 1989 Act

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Execution

Companies

Execution of documents by individual on own behalf and for the company

Williams v Redcard Ltd
[2011] EWCA Civ 466

Summary

Where the authorised signatories for a company executed a contract for the sale of land in their own personal capacity, they were also taken to have executed that contract on behalf of the company.

Facts

A contract provided for the sale of the freehold of a block of flats (owned by a company) and for the sale of the leasehold flats by individuals who were directors of the company. A supplemental agreement was subsequently entered into, which varied the completion date but confirmed the contract in all other respects, and incorporated the contract. The supplemental agreement defined as the sellers both the company (in respect of the freehold interest) and the individual directors (in respect of the leasehold interests). The sellers’ part of the supplemental agreement was signed by the individual directors in a box headed “Seller”.

The buyers refused to complete the purchase on the basis that, among other things, the supplementary agreement was not executed by the company, so the buyers could not be compelled to complete it. The sellers brought a claim for damages and applied for summary judgment. The buyers made a cross-application for summary judgment for return of the deposit and for strikeout of the claim.

First instance

A master in the Chancery Division held, among other things, that the supplementary agreement was not executed by the company and that it was not valid and binding.

The sellers appealed. It was common ground between the parties that since the supplementary agreement incorporated all the terms of the original agreement it was the execution of the supplementary agreement that mattered. The High Court held, on appeal on the execution issue, that the supplementary agreement was executed by the company in accordance with the requirements of s44 of the Companies Act 2006 and complied with s2 of the Law of Property (Miscellaneous Provisions) Act 1989.

The buyers appealed to the Court of Appeal. It was common ground between the parties that the contract had to be signed "by or on behalf of" each party to the contract under section 2 of the 1989 Act.

Decision

The Court of Appeal dismissed the buyers' appeal.

Section 44 of the Companies Act 2006 states:

    "(2) A document is validly executed by a company if it is signed on behalf of the company-

      (a) by two authorised signatories, or
      (b) by a director of the company in the presence of a witness who attests the signature.

    (3) The following are "authorised signatories" for the purposes of subsection (2)-

      (a) every director of the company, and
      (b) in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company.

    (4) A document signed in accordance with subsection (2) and expressed, in whatever words, to be executed by the company has the same effect as if executed under the common seal of the company......"
The appeal turned on what the words "expressed in whatever words to be executed by the company" in s44(4) added to the presence of signatures by two authorised signatories in accordance with s 44(2) and whether that added requirement was satisfied in this case. Those words had to add something to the provision in subsection (2) that a document was validly executed by a company if it was signed on behalf of the company by two authorised signatures. Subsection (4) did not simply provide that a document signed in accordance with subsection (2) had the same effect as if executed under the common seal of the company.

It was not correct that the critical words required that, in addition to the signatures of the individuals who were the authorised signatories, there had to be words spelling out that those signatures were "by or on behalf of" the company.

That this was a simple case within subsection (4) could be clearly demonstrated by the fact that the signatures to the supplementary agreement were under the words "Signed....Seller". "Seller" was defined in the supplementary agreement as including both the company selling its freehold and the individuals selling their leaseholds, the signatures included the signatures of two authorised signatories and the use of the defined term "Seller" above those signatures meant that the document was expressed to be simultaneously executed both by the company and by the individuals, all being included in the term "Seller".

Accordingly the supplementary agreement was executed by the company.

Comment

Despite this decision, it would still be sensible to state expressly that authorised signatories are signing “by or on behalf of the company”, and for those executing a document in more than one capacity to sign more than once, clearly specifying in each case the capacity in which they are signing. It was fortunate for the sellers in this case that both the company and the individuals were defined as "Seller".


Land Registry

Execution of deeds

See also The Land Registry Practice Guide 08 - Execution of deeds which deals with the execution of deeds, generally and includes companies in the light of s44 of the Companies Act 2006).


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