Corporate identity theft: a forged signature may bind the company

It is trite law that contracts made by an agent within the scope of his actual or ostensible authority are binding on the principal, so that the principal’s liability on them is primary and personal. After the case of Alan Lovett [1], it seems that the same principle will apply to contracts in which the agent has forged the signature of his principal. Andrew Keltie and Charles Thomson of Baker & McKenzie analyse this case of ‘corporate identity theft’.

Andrew Keltie (+44 (0) 20 7919 1376, andrew.keltie@bakernet.com) is a Partner and Charles Thomson (+ 44 (0) 20 7919 1879, charles.thomson@bakernet.com) an Associate in the Dispute Resolution Department at Baker & McKenzie LLP.

Facts

Barclays Bank appointed joint administrators in respect of a company called Carson Country Homes Limited (CCH) pursuant to the powers conferred by a debenture and purportedly made by CCH in favour of the bank. It was asserted that the debenture was not binding on the company and that the appointment was therefore invalid on the ground that one of the signatures on the debenture had been forged. The main issue was whether the forgery was binding on the company.