I suspect there may be no simple answer to this, but always worth asking for opinions!
Company A contracts Company B to do some work for them, no official contract, just an exchange of emails and a written quote. Stage 1 is completed and company A pays for it. Before stage 2 can be done various things happen and Company B shut down. Company A is not out of pocket but is halfway through a project and understadably not happy. They would like to sue Company B for breach of contract. They would also like to personally sue the directors of Company B for breach of contract.
Can it really be the directors that are held accountable for this?
All thoughts/opinions/discussions welcome please.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
Without a contract detailing all the terms and conditions, especially if contract not fulfilled to completion, I dont think Company A has much hope. At the end of the day they havent suffered a loss so what would they be suing for? Cant they just get someone else to finish it off for them?
Regarding the suing
1. Suing company B - What the point if it is shut down? Does it have any assets to claim against?
2. Suing directors of company B - Would be difficult to attach personal liability as the agreement is with the company rather than the directors individually. This is where the directors are protected by limited liability unless they acted wrongly in relation to the company eg wrongful trading eg taking the contract on when they knew they had no chance of fulfilling it.
Will depend on the sums involved by will be costly to hire lawyers and at the end of the day they are not out of pocket then they are only suing for non completion of the contract when may be cheaper to contract someone else to pick it up.
Moral of the story. Get a written contract signed before engaging.
You can only sue for actual loss although that loss can extend to reputation (that does not seem to be the situation in this instance).
The fact that there was no written agreement is immaterial as agreement can be deemed by actions.
I'm afraid that I don't have my ACCA law books in the office with me so it's an incomplete reply. However, the case law that you need to look at for contract without written agreement is Brogden vs Metropolitan Railways (1876) where it was held that contract can also result from a pattern of past practice.
In the case that you highlight company B shut down so company A doesn't have a leg to stand on especially as no loss actually resulted.
All in all think of the facts :
We don't have a written contract. The company that we worked with doesn't exist anymore. We haven't actually lost any money.
Why would a court lift the veil for that scenario?
I'm sure that some solicitor would be happy to take the case on but to my mind the directors have lost before they start and the slap with a huge solicitors bill on the back of a loss for their hubris might make them wake up a little to business reality.
I despair with this sue everyone for everything mentality becoming prevalent in our society.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
on the written contract point as noted in my response I believe that the metropolitan railways case shows that a written contract is not always necessary for a legally binding deemed contract to exist.
As I say though, I'm just spouting from memory rather than my law books so not sure if there are other cases that override BvMR for specific scenario's.
I think though that we are in agreement that to sue would indeed be a foolhardy venture on the part of company A.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you both for your replies. That was also my understanding of the situation. Company B has nothing at all except debt. There was no loss of money, and Company B has given Company A the details of Company C who would be very happy to take over the work at the same price. In my opinion Company A are just flailing around threatening to sue everyone because they are annoyed.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
If company C has been passed by company B who can take over at the same price and assuming the same standard then dont see what Company A's problem is.
In my opinion company B has went beyond their legal duty in sourcing someone else who can take it on. In most cases Company B would wash their hands of matters.
