Last edited 14 Jul 2015

Derek Hodd Limited v Climate Change Capital Limited

In the case of Derek Hodd Limited v Climate Change Capital Limited (2013) the wrong company was named in a contract and they then tried to resist payment of outstanding invoices.

Establishing the correct identity of a contracting party is very important, and failure to do so takes the risk that no contract will come into existence due to uncertainty. The law has a number of remedies to correct such uncertainties and will look at how the contract is constructed and at the intentions of the parties to try to decipher what it is they actually meant.

In 2006 the claimant entered into a letter of engagement (“the contract”) to provide cost reduction services to Climate Change Capital Limited, the defendant. However the claimant mistakenly named the wrong company in the contract, recording it as Climate Change Group Limited, a dormant company, rather than Climate Change Capital Limited.

The claimant gave evidence that it was unaware of the correct company to specify and regarded it for the defendant to identify the appropriate company; it was concentrating on the provision of the services, not on the particular company in the group to whom services would be provided. As the claimant had not been advised of the identity of the contracting party it undertook a companies house search to check the names. It also appeared that the defendant had failed to consider the correct name when it signed the contract. The judge, Mr Justice Henderson, noted that “...neither side directed its mind to the question [of identity] although both sides clearly intended that CCC (Climate Change Capital) group should be legally bound.”

The judge found that it was the common intention of the parties that the contracting party was CCC and that by mistake the contract failed to reflect that common intention. Interestingly the defendant did not dispute identity until the claimant tried to enforce the contract for payment of outstanding fees. Then the defendant contended that no contract was concluded with any member of the group. The claimant argued this was a case of ‘misnomer’. Misnomer is a wrong/inaccurate use of a name or term and may simply amount to a clerical error.

The judge held that this was not a mere clerical error, but as a matter of construction the parties intended the contracting party to be CCC and so the error should be corrected. The judge was clear in his findings, and endorsing a textbook quote on misnomer found that the court can take account of the background evidence of the parties’ dealings to ascertain the correct contracting party.

This case demonstrates the court’s common sense approach to mistakes as to the identity of contracting parties but also fires a warning shot to those hastily preparing contracts where a number of companies are comprised in a group to take the time to correctly establish exactly who it is they are contracting with.

Mistakes could be costly, landing you in court without a contract between you.

This article was created by construction lawyer --Najma Dunnett as part of an ongoing series of legal articles. Follow Najma on Twitter to keep up to date with the latest changes in construction law @NDunnett_Cons.