Muskham Finance Ltd v Howard

In 1958, Kennerson, the Second Defendant in this case, was in possession of a motor car which he was in process of purchasing from the Plaintiffs on hire-purchase terms. In September, 1959, he still owed £197 under the hire-purchase agreement. In the same month he obtained the permission of the Plaintiffs to sell the car, and entrusted one Turner, a motor car dealer in Cambridge, with the sale. Turner found a buyer for the car, namely, the First Defendant Howard, who, however, also wanted hire-purchase terms, and Turner decided to put this second hire-purchase transaction through the Plaintiffs also. Nothing really turns on the precise mechanics of the transaction, but it was necessary that certain forms should be signed. Turner got Kennerson to sign, first of all, a "Sales Note". This was in form an offer to sell the car to the Plaintiffs for £197 plus a charge of £39 8s. Od. for credit, making £236 8s. Od. in all. Kennerson signed this Sales Note as though he were the dealer, though he did not understand that he was doing so, and simply relied on Turner's representation that this was a document which Kennerson had to sign to enable the sale to take place. No issue arises on this aspect of the case.

The Sales Note, together with other documents, were sent by Turner to the Plaintiffs, to enable the new hire-purchase transaction to go forward. One of these documents was a proposal form signed by the proposed new hire-purchaser, Howard. At the bottom of the document was a detachable form headed "Indemnity Form". This was a form intended to be signed by a person willing to act as a surety, and so far as material it reads: "Indemnity Form. To Huskharn Finance Limited…. I, D. T. Kennerson…. request you to enter into the proposed Agreement which is expressed to be between yourselves of the one part and (blank)…. of the other part relating to the supply upon deferred terms of certain goods astherein specified the total purchase price, of which is £197 and in consideration of your so doing I hereby…. undertake and agree with you as follows:- 1. I will upon demand pay to you such sum or sums of money as may at any time or from time to time have become payable by the customer but be unpaid by him. 2. I will indemnify and keep indemnified you your successors and assigns from all loss or damage suffered and all claims costs and expenses made against or incurred by you in any way arising out of or consequent upon your having entered into such Agreement whether arising out of a breach by the customer of any of the terms and conditions thereof or otherwise including any such loss or damage etcetera as aforesaid as may arise from the said Agreement…. 3. No relaxation or indulgence which you may from time to time or at any time extend to the customer shall in any way prejudice or act as a waiver of your strict rights against me hereunder".

When these forms reached the Plaintiffs, it was noticed that the Indemnity 7or;ji had not been signed by anybody, and accordingly the Plaintiffs sent it back to Turner. Shortly after this, Turner told Kennerson that he, Turner, had sold the car and said to Kennerson "Gould you sign this paper which is the release note?". It was in fact the form of Indemnity, but Kennerson thought it was a document which would allow him to pass the vehicle to another person, and terminate his, Kennerson's, interest in it. The document was at the time on Turner's untidy desk, which was covered with many papers, and only about the bottom two or three inches of it was showing. The...