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Oral Agreements – Do You Even Know Who You Are Contracting With?

One of the many drawbacks of oral agreements is that the status, and even the identity, of the contracting parties can be left in doubt. One High Court case involving a substantial waste removal contract underlined how very important it is to employ a professional to put such agreements in writing.

A group of companies that provided waste removal, haulage and other services to the construction industry had agreed to clear the site of a waste transfer station with a view to the property’s sale. The deal had been struck orally with the owner of the site, which was operated by the latter’s limited company.

The company later went into liquidation and the group launched proceedings against the owner on the basis that it was owed more than £700,000 for its work. The group also argued that the owner had personally guaranteed repayment of £85,000 that it had loaned to the company in order to meet its staff costs.

There was no dispute that a binding contract had been agreed. However, the Court found that the owner had been acting on behalf of his company and not in his personal capacity. He was not a party to the agreement and he had given no personal undertaking to pay for the services provided. The loan had also been made to the company and was not enforceable against the owner.

The Court accepted that the owner had been enriched at the group’s expense, not least because the removal of waste had enhanced the site’s value. However, it was common ground that the existence of a subsisting, enforceable, contract with the company precluded an unjust enrichment claim against the owner. The group’s claims against the owner were dismissed in their entirety.