Contract: Can a Party be Contractually bound in Multiple Capacities?

Contracts are intentional.  Usually.  When a party accedes to contractual obligation, that is ordinarily done through the lens that they sign in a specific capacity, intending to be bound in specific and certain ways.  But occasionally contracts are marked by inadvertence more than intent.  For example, suppose a company enters into an agreement.  But the terms of the agreement, in their body, seek to impose liability on directors.  Are the directors bound when they sign on behalf of the company?  This is an issue on which there is useful authority.  There are two leading Court of Appeal cases that are summarised below.

Vuletic v Contributory Mortgage Nominees Limited:[1]  Contributory Mortgage Nominees Limited (CMNL) sold a property to Harris No 10 Limited (Harris).  Mrs Vuletic was a director of Harris.  Clause 26 of the ASP stated that the obligations of Harris were guaranteed by Mrs Vuletic.  At the foot of the agreement Harris signed by Mrs Vuletic with the words “director” handwritten underneath it.  There was a default.  The question was whether Mrs Vuletic was personally liable.

The Court of Appeal stated that “[n]o one disputes that it is possible for a person to sign a contract once but in a dual capacity. But there is a presumption that, if the signer purports to sign on behalf of a company or another, he or she is signing only in that capacity”.[2]  In this case the Court of Appeal identified three reasons why Mrs Vuletic was arguably only signing in her capacity as a director:

(1)      From the overall structure of the agreement it can be argued that there was no intent for Mrs Vuletic to be personally bound.

(2)      The clause relied on for the guarantee could be construed as a covenant by the company to procure signatures rather than expressing an immediate obligation of guarantee.

(3)      By signing as “director” there was a presumption that Mrs Vuletic had signed solely in that capacity.

Trotter v Avonmore Holdings Limited:[3]  Avonmore Holdings Limited (AHL) was party to a licence agreement with ACP Computer Solutions Limited (ACP).  At all relevant times Ms Trotter and Mr Webb were directors of ACP.  AHL contended that Ms Trotter and Mr Webb signed the licence agreement in dual capacities as directors of ACP and in their personal capacity.  In so doing, as alleged, they became personally liable and guaranteed the obligations of AHL.  The Court of Appeal said that “[i]t is certainly possible for a document to be signed by a person in a dual capacity. The question for the appeal and cross-appeal is whether Ms Trotter and Mr Webb did so”.  In rejecting this assertion the Court of Appeal said the following:

(1)      On the face of the document Ms Trotter and Mr Webb signed as directors.  They signed to bind the company and their status as directors was clearly identified.  Their signature in that capacity was necessary to bind the company.

(2)      Ms Trotter and Mr Webb were not identified as shareholders of ACP.

(3)      The initialling of pages by the directors did not indicate an intent to be personally bound.  There was no suggestion that the agreement was being initialled in any capacity other than director.

The above two cases were followed in Gibbons v Summer.[4]  In concluding the signature did not bind in dual capacities the High Court stated as follows:[5]

… Mr Summers has clearly signed the certificates in his capacity as director of Majpie Investments Limited and Mokoia Island Tours Limited. This raises the presumption that he was signing only in that capacity. The language of the security clause suggests an obligation to be performed in the future rather than acceptance of immediate effect. This is reinforced by lack of identification of the directors as independent parties to the certificates. There is no clear extrinsic evidence that Mr Summers was accepting an independent obligation at the time of signature.

[1]           Vuletic v Contributory Mortgage Nominees Limited (2006) 22 NZTC 20,003 (CA).

[2]           At [13], referring to Young v Schuler (1883) 11 QBD 651 (CA); Elpis Maritime Co Limited v Marti Chartering Co Inc [1992] 1 AC 21 (HL) at 28-31.

[3]           Trotter v Avonmore Holdings Limited (2005) 8 NZBLC 101,646 (CA).

[4]           Gibbons v Summer HC Rotorua CIV-2007-463-202, 28 September 2007.

[5]           At [33].