In the recent case Lendlease v Aecom the Court had to consider and answer the following questions in relation to a consultancy appointment – it should be a lesson to all dealing with development documents:
- If an appointment/contract includes a clause specifying a limitation period (in this case 12 years) but is not properly executed as a deed, will the limitation clause prevail?
The answer in this case was no. The Judge held that whilst the clause provided a longstop for limitation purposes it did not necessarily, on the facts of this case, override the question of whether the appointment had been executed as a simple contract (sometimes called under hand) giving a six-year limitation period or as a deed giving 12 years. This meant that time might expire before the date stated in the contract clause.
- If the formalities required by an organisation for executing deeds are not complied with, is the execution invalid and if so, what limitation period applies?
Aecom had not complied with those formalities. The appointment was signed by individuals who were not officers of the company and did not have authority to execute deeds. However, Aecom unsuccessfully relied on their incorrect execution of the appointment and argued that a six year limitation period, not 12 as would be the case if properly executed as a deed, applied. This was by way of defence to the claims made against them, even though the signing individuals had held themselves out as having authority to sign and this had been relied upon by the other side.
The Judge considered Aecom’s position was artificial and was defeated by what is known as legal estoppel. Estoppel may apply (and did apply in this case) when the other party has relied, to their detriment, on representations made to them. It was therefore not open to Aecom to rely on the appointment not having been executed as a deed and it was held that a 12-year limitation period applied. This meant that the claim against Aecom was not out of time.
A cautionary tale – don’t rely on incorrect execution to count in your favour
Though the decision was in favour of upholding a 12-year limitation period for the reasons indicated above, parties to legal documents executed as deeds should clearly not rely on incorrect execution as the basis for the document being interpreted as a simple contract with a six year limitation period. The fact that this was a key ground of dispute in this case illustrates that incorrect execution can lead to disputes and be an expensive problem to resolve.
The moral is that documents should always be checked to make sure that the formalities have been complied with. For example, is it clear who has signed (names should be printed under the signature) and if so, are they officers of the company? A quick check at Companies House will give the names of current officers. If they are not the signatories, insist on seeing written authority that the signatories are able to sign on the company’s behalf.