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Joshua
Joshua, Lawyer
Category: Law
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Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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A fellow director (who has now left the business) signed a

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A fellow director (who has now left the business) signed a contract with Peninsula Business Services for the provision of HR and employment litigation services. The terms of the contract were based on our company having 8 part time staff and a wages bill of £20k. The contract was signed in July 2011 and is for a fixed term of 5 years, with a monthly payment of £145 ex VAT. At the time of signing the contract, our company was actually employing 2 part time staff and the wages bill for the financial year came to £4.3k. My fellow director was over-ambitiously banking on significant growth, and Peninsula, in my view, took advantage of that, rather than advising him properly on the suitability of the contract. The company has since employed no more than 2 part time staff. It is my view that the contract is and never has been fit for purpose. Am I am able to get out of the contract now without further liability? Many thanks.
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

May I ask if the director that has left the business was authorised to enter into the contract without approval please based on the level of authority agreed internally?

Customer:

Hello Joshua. That is a good question. I was a director of the business at time - since incorporation in fact, but a 'sleeping partner, i.e., my fellow director had operational responsibility for the business and I had no involvement with that. I was disappointed that he did not consult with me before taking on such a large liability. The most accurate answer is that no authority was agreed internally.

Joshua :

Thanks. If no specific limits as to directors authority were agreed then the starting point will unfortunately be that the director would have full authority to enter into the agreement. It is a matter of internal corporate governance to set limits on directors authority to enter into contracts and commitments and if this was not established then there is little that can be done unfortunately in respect of the previous director.

Joshua :

In terms of the contract with the supplier, because this is a business contract there is very little statutory protection as distinct to consumer contracts where there is much more. This is because it is felt that business contracts with a much higher level of skill and accordingly should be free from constraints as to terms of contracting. In order to get out of this business contract you would need to point to either a substantive breach of contract in respect of the service provided by the company which I presume is not the case or a misrepresentation on the part of the supplier in respect of the contract. From what you say in small part it is likely to have been the previous director that was ambitioous in respect of his expectations and I suspect establishing a misrepresentation on the part of the supplier may be difficult.

Joshua :

If you cannot show the above, in the assumption there is no personal guarantee in place you could consider the nuclear option of a voluntary liquidation and transfer of business to a new company which would render the contract against a company with no assets but this has costs associated with it and administrative work which given the size of the contract would not justify the same however I mention it for the sake of completeness.

Joshua :

Unfortunately business contractors owe very few duties to you as a business and are free to explot commercial angles as they see fit which may not be the case in respect of consumer contracts.

Joshua :

Is there anything above I can clarify for you?

Customer:

Hi Joshua, that is all very helpful indeed. Not welcome reading but that is

Customer:

Sorry, pressed the button too soon. Not very welcome reading, but it is good to know where I stand. Thank you.

Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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