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Do you always read the small print? What if you were spending over £300k?

The High Court in London recently considered a case where an unfortunate individual believed he was acting on behalf of a company rather than himself.

Background

In 2018, the Defendant (McMahon) and the Third Party (Witney) incorporated Bluecrest Bloodstock Limited (the Company), intending to build a portfolio of bloodstock assets under an Enterprise Investment Scheme (EIS). 

In November 2018, Ms Whitney signed a “New Buyer Form” with the Claimant on behalf of the Company seeking a £300k credit line. This included ticking a box to acknowledge that she had read and accepted the Claimant’s Conditions of Sale. A 60-day credit line was approved by the Claimant.  

Later that month, Mr McMahon, on behalf of the Company, purported to purchase two foals at auction for £320,775. This was before the EIS had been approved. Indeed, that approval never materialised, and, as a result, the Company failed to attract the intended investment.  

In January 2019, Ms Witney emailed the Claimant to advise of the difficulties with the EIS. Solicitors’ letters followed.

The two foals were re-sold at a lower price by the Claimant in their October 2019 Sale. It was accepted that the Claimant had, however, acted to mitigate its losses. 

Judgment

The small print, in this case, included Condition 5.4: 

Unless there is in force a Purchasers Authorisation accepted in writing by [the Claimant] the highest bidder in the ring and any principal for whom he may be acting shall be jointly and severally liable under the contract of sale and under these Conditions of Sale.

Accordingly, Mr Justice Claver found for the Claimant concluding:

Finally, it is possible to feel a significant degree of sympathy for the Defendant who, I accept, believed that he was binding solely on behalf of [the Company] in ignorance of condition 5.4, but that does not give him a defence to this claim.

…it would seem only fair that both the Defendant and Ms. Whitney should share in these losses… It may be that the Defendant has a legal remedy against Ms. Whitney… but that is not an issue …in these proceedings, as Ms. Whitney is not a party to them. 

Comment

Do you always read the small print? What if you were spending over £300k?

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By Paul Sullivan FRSA

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