Contract ambiguities: Do you know for sure who owes you?

If you go to court to collect money, the burden of proof is on YOU to prove the defendant owes it. That means you need to present a watertight portfolio of evidence in order to get the judgment you want. The best evidence by far is a written contract, but even these can contain ambiguities about who is liable. Just look at this scenario:

Imagine an employee of a company called Kwality & Klass Kitchens Ltd places an order for 100 metres of specially engineered copper pipe. You agree to supply the pipe but you do not receive payment. However, there’s a further problem… That’s because it isn’t clear whether the employee who placed the order was acting on behalf of the company or himself. In fact, the company asserts that the employee was acting as an individual rather than as a representative of Kwality & Klass Kitchens.

So who do you pursue in this situation? Is it the employee personally or Kwality & Klass Kitchens? Well, it’s a matter of interpretation for a court, based on evidence and sources of law. This means that if you have identified the wrong party in your claim, then you have wasted time and money trying to get back what you’re owed. Furthermore, you may have to pay costs on behalf of the other side for the failed action.
Importantly, a court will want to see a paper trail that identifies the contracting party. In the absence of such a trail, the court will hear oral evidence given by both you and the defendant. The problem with this is your chances of success are dramatically cut to around 50/50. That’s because the winner will be the party whose oral evidence the court chooses to believe.

We often see disputes of this nature… As a result, here are some useful tips for creating a legally admissible paper trail that could save you a lot of hassle and expense:

•  Request that a signed credit account application is completed which clearly identifies the contracting party.

•  Ensure the employee clearly indicates against his or her signature the capacity in which he or she is signing the contract. 

•  Insist the buyer raises a purchase order for your records that identifies who is ordering the goods or services.

•  Send across an order confirmation message containing the name of the contracting party.

•  Include a reference of your terms and conditions applying at the bottom of all documents and communications in order to ensure incorporation. 

•  If you require additional security from a company, before letting them have credit, obtain a personal guarantee signed by a director personally or alternatively a parent company guarantee. 

If you are sometimes unsure about the identity of the person or organisation with whom you have contracted, or if you are sometimes owed money that is disputed, then our Unlimited Legal Advice package ensures you have a solicitor on hand to help you… And that could save you money in the long run… 


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29 June 2016