20 June 2016

Marlbray Limited v Laditi

The recent case of Marlbray Limited v Laditi raises interesting questions on the validity of contracts.

Park Plaza Westminster Bridge Hotel is a 4 star hotel that offered 999 year leases on hotel rooms. Dr Mobolaji Laditi and his wife attended a sales launch, where Mr Laditi– but not his wife, Dr Olutola Laditi – signed instructions authorising the exchange of contracts on a hotel unit for £315,000 plus VAT. He also signed a contract on behalf of himself and his wife. The hotel's solicitors signed, and exchange took place on the day.

Mr Laditi later paid a further deposit, and still later contacted his solicitors to arrange a mortgage jointly with his wife. However, the mortgage – and the purchase – fell through, and the hotel developers rescinded the contract and kept the deposit.

Mrs Laditi argued that she had not signed the contract, had not authorised her husband to sign for her, and had not authorised solicitors to act for her. Her argument was that not only had she not signed, but also that all the deposit payments had come solely from Mr Laditi's account (although she had in fact been topping up his account). She had been looking after her children outside for much of the sales launch, and was apparently very annoyed that Mr Laditi had reserved an apartment without her input!

She became even more annoyed when she learnt that they had to make deposit payments, which led Mr Laditi to tell her as little as possible in a (probably futile) effort to ease the tension. This meant that Mrs Laditi did not see the letter confirming exchange, and was not aware of any binding contract (although appreciated that the deposit payments must denote "some kind of commitment").

The courts found that there was a valid contract – but between the developer and Mr Laditi alone. Although the 'buyer' was named in the contract as both Mr and Mrs Laditi, the contract terms provided for joint and several liability. This meant that each party was independently responsible for all the terms in the contract, meaning that Mr Laditi alone could be held liable to perform the entire contract.

The courts also found that when Mr Laditi signed the contract, he had no authority from his wife and therefore could not sign for her. There was some question as to whether Mrs Laditi had subsequently 'ratified' the contract by her actions in applying for a mortgage jointly with her husband, but the courts found that the fact that she did not know that her husband had entered into a contract at the launch meant she could not possibly ratify it.

Mr Laditi clearly intended to enter into a contract, and there was no evidence that he had only contracted on the basis that Mrs Laditi would be a joint purchaser. This meant that Mr Laditi was bound, and his deposit was forfeited. Since Mrs Laditi was topping up his account, the decision cannot have done much to ease the tension between husband and wife.

This raises a couple of important points for anyone considering entering into a contract:

  • When signing on behalf of another party, be sure that written authority from that party exists.
  • The majority of contracts are expressed to jointly and severally liable. This should be considered when more than one person is signing – if there is any doubt that one party has signed, the other parties may be on the hook for the entire contract.
  • The intention behind a contract is key. Mr Laditi was 'on the hook', because he could not demonstrate that his intention was that he would only enter into the contract were it binding on both parties. If the intention to enter into a contract is contingent on an important condition, it is vital to make this clear in the contract itself.

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