Gordon Ramsay, the celebrity chef, known for his brutal language in the kitchen and fine food, has lost the infamous High Court battle with his father-in-law, Christopher Hutcheson in January this year.
During 2010, Hutcheson was Ramsay’s right hand man in helping him build his restaurant empire. It appears from the evidence that Hutcheson was allowed to exercise his authority to bind Ramsay and his empire to most things, such as contracts, and included personal guarantees to a 25 year lease, which was the topic of this lengthy court battle.
Hutcheson was accused by Ramsay of using a ‘ghost-writing’ machine to sign a personal guarantee. Ramsay permitted use of this when he was not available for a variety of reasons. It was denied by Hutcheson that he had acted outside his authority to sign on Ramsay’s behalf. The document that was the subject of this dispute meant that Ramsay was personally liable for the rent of a premises in the sum of £640,000 per year of the lease.
Despite the Judge agreeing that Hutcheson committed Ramsay to the lease of the premises, the Judge decided that Hutcheson was acting within the wide authority given to him by Ramsay and that Ramsay had knowledge that his ghost-writing machine was being used on legal documents.
The ‘A’ word - Authority
This recent case raises the question of whether you know how much authority you are giving your staff. If you or your staff, or anyone that you are entering into a contract is not the correct and most appropriate authorised person, this may make the contract unenforceable and can blur the lines.
This can be further complicated by the fact that you can give your staff actual authority (where you tell them they can bind the company) or apparent authority (where the name of a position could give the impression they can bind the company, for example, a Finance Director). Then there are agents. An agent is someone who has your permission to be known as acting for your behalf. You may or may not have meant someone or a company to be an agent but they could nevertheless be considered an agent in law. It will depend on any legal agreements you may (or may not) have with them.
If you have any concerns and wish to minimise your exposure to risk of a legal dispute over this, keep the following guidelines in mind:
- Perhaps most obviously, do not have a ghost-writing machine for your signature!
Keep signatories to cheques and documents to a minimal amount of people, or to Directors only.
- Review your current terms and conditions. What do they say? Do you want to only enter into contracts unless they are signed by Directors of the parties you are dealing with? If so, make sure your documents reflect that.
- Do not be afraid to ask the other party you are dealing with to speak to a Director for clarification. Clarification at the outset goes a long way to avoiding legal disputes.
- Finally, seek legal advice on your position if there is a grey area at the beginning.