If you accept appointment as someone else’s agent (called your principal), or as attorney for someone else, you take on certain responsibilities, including the duty to exercise proper care, skill and diligence. When signing or making contracts as agent or attorney you need to ensure that you haven’t exposed yourself to personal liability. In a recent case (Sunnyvale Property Trust Ltd v Liu [2015] NZHC 2804) the attorney must have been relieved to successfully rebut legal action against him when his principal failed to complete a property purchase.
Mr Zheng signs agreement for Mr Liu
Mr Zheng signed an agreement on behalf of Mr Liu to purchase a property from Sunnyvale. Mr Liu was named in the agreement as the purchaser. When Mr Zheng signed the agreement he did not write on the agreement that he was the agent or attorney for Mr Liu, although the fact he was signing as attorney was made known to Sunnyvale’s real estate agent. Mr Liu did not complete the purchase. Sunnyvale cancelled the agreement and sued both Mr Liu and Mr Zheng in the High Court for $520,680 damages for breach of contract. Sunnyvale’s claim against Mr Zheng was based on the fact that Mr Zheng’s signature appeared on the agreement without any qualification or statement on the agreement that Mr Zheng was signing as attorney.
Mr Zheng sought summary judgment from the Court that none of Sunnyvale’s claims against him could succeed. Mr Zheng claimed he was not personally liable to Sunnyvale because he had signed as attorney for Mr Liu.
The judge held that the question as to whether the signatory is liable turns on the particular context of each contract. The judge referred to a general legal rule that, unless there are other indications, when someone makes a contract as the agent for someone else, he or she is not personally liable to the other party to the contract. The judge found that, on assessment of the facts surrounding this contract and the terms of the contract itself, it was clear that Mr Zheng acted solely as agent for Mr Liu and was not assuming any personal liability. There was nothing in the written agreement, the evidence of the agent, the evidence of the parties, or the events that took place after the agreement was signed which was inconsistent with the oral advice to Sunnyvale’s agent that Mr Zheng was signing as attorney. The purchaser on the agreement was recorded as Mr Liu. Mr Zheng was not identified anywhere as the purchaser. The fact that Mr Zheng signed the agreement did not alter the identity of the purchaser. Mr Liu was therefore the only person who would be liable (and have rights) under the contract. As a result Mr Zheng was successful in establishing that Sunnyvale could not succeed in its claim against him.
Avoiding personal liability
As stated in the Sunnyvale case, your liability under an agreement you sign as agent or attorney will depend on the wording and circumstances of the contract you are signing. First and foremost you should include a statement with your signature that you are signing as agent or attorney. Mr Zheng could have avoided the expense and stress of legal action if he had done this. If you have any doubt as to your liability you would be well advised to take legal advice before you sign.
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Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.