EMPLOYER’s UNDERTAKING TO ANSWER FOR THE DEBT OF MAIN CONTRACTOR MUST BE IN WRITING

Actionstrength Ltd v International Glass Ltd [2002] BLR 44

In Actionstrength Ltd v International Glass Ltd [2002] BLR 44 the question asked of the Court of Appeal was as follows: is an agreement by C (the building owner) with A (a sub-contractor), to induce A to continue to work for B (the main contractor), that if A is not paid by B, C will to that extent redirect to A monies due from C to B, a guarantee within s4 of the Statute of Frauds 1677? The Court of Appeal answered the question in the affirmative. The significance of the question is that a contract that falls within s4 must be in writing. The agreement the subject of the present litigation was not in writing and the consequence was that it was held to be unenforceable as a result of the operation of s4. The case underlines the need to take great care when seeking a guarantee, or an undertaking that resembles a guarantee. Wherever possible the guarantee should be in writing and signed by the guarantor. A failure to reduce it to writing may result in a court concluding that the undertaking is unenforceable.