Tricked into Signing Dodgy Contract with Company in Administration

[stillstanding25]

My friend decided to take over her ex-boss' small business after her boss retired - rather than face losing her job. She has borrowed heavily to do this. Unfortunately, she is a very naive and trusting person and did not realise that people would be trying to exploit her.

 

She let "a very nice saleswoman who was so helpful and understanding" talk her into signing a contract to provide her with a service that was going to help my friend make money. My friend signed a contract after this saleswoman explained the contract to my friend thoroughly. My friend also provided her bank details.

 

Then, a lot more money started going out of my friend's account than she expected and the service is not making her any money. When she rang the company to ask them to explain, they told her that the saleswoman no longer worked for them. They did send my friend a credit note for some of her money but, her account has not been credited for any amount, at all.

 

I looked at the contract and it is definitely NOT what my friend was told it was. It is a hire agreement and ties my friend to the contract for a "fixed period" of over 3 years and will cost her thousands of pounds. The contract also mentions several different clauses that are not included with the page my friend signed - so we both have no idea what else is included. Instead, this "agreement" threatens my friend with interest charges, extra costs, repossession and losing her credit worthiness if she does not continue to pay up. My friend is absolutely terrified of losing her good credit history. Yet they have access to take whatever money they want from her account.

 

I have tried Googling the company to find out more about them and they do not have a nice reputation for dealing with dissatisfied customers. Also, the company is currently in Administration.

 

How can my friend get out of this contract? She trusted the saleswoman and felt that it would have been rude to stop and read the contract before-hand!!! Also, is this company allowed to make long-term contracts whilst in Administration?

 

Please help. My friend is currently losing money and this contract is not helping her at all.

[steampowered]

It is hard to understand what this is all about. What was the service which was promised? What is being 'hired' under the actual contract? Was the company in administration when the contract was actually signed, or did it go into administration afterwards?

 

The starting point is that your friend may well be bound by the contract. The law expects people to read contracts before signing them - particularly when it is a business-to-business transaction. It is best to start with trying to get a copy of the entire contract and searching for a way out under its terms - for example, maybe she can cancel the service or there is a termination right if one of the parties becomes insolvent/bankrupt.

[stillstanding25]

I am sorry if you do not feel that I gave enough information. The truth is this company really DO NOT HAVE A NICE REPUTATION for dealing with dissatisfied customers. My friend is vulnerable and easily intimidated and they still have full access to my friend's bank account.

 

The service was providing a coffee machine for my friend's customers to use. My friend was told that she was paying to slowly buy the coffee machine at a lesser payment, for a shorter period.

 

The company has been in Administration for a very long time - long before the contract was signed.

 

Last return was made in 2011 according to Companies House.

[ssparks2003]

There is normally a break clause if either party goes into admiistration, but someone is gonig to have to actually read what has been signed up to. as a buisness there is a lot less protection within law than for a private indervidual as it is belived (though this is proven wrong time after time) that a buisness should be able to uderstand commercial terms. it does not matter whether the other party does not have a nice reputation or if you friend is as lovely as a kittens tummy the issue will initally refer back to the contract.

[steampowered]

Understood. It is slightly odd that this company entered into long term contract while in administration, although I do not think there is actually any rule against it.

 

When you mention the 'reputation' point, do be aware that once a company is in administration, the original directors do not run the company anymore. The company will be run by the administrator.

 

The first step needs to be to get a copy of the contract, have a good read and see if there is a get-out. I would also contact the bank and get them to cancel the continuous payment authority.

[king12345]

Isn't one of the clauses of trading while going into administration that the company makes this clear to customers / suppliers?

Isn't there any hint of this administration in the contract?

[stillstanding25]

I actually thought for a minute there that ssparks2003 had guessed who my friend was, since I have heard similar descriptions of her before...........

 

Actually it is all looking worse now that I have really tried to dissect the little bit of contract we have. Before I was just trying to see how much my friend had signed up to.

 

The firm we are dealing with has a very distinctive name and its logo is on the top of the contract. It's customer service people still have the same names as they did before (when featured in on-line forum complaints for the original firm that went bankrupt). However, the company my friend is dealing with is apparently not the same company - although the name is still very distinctly almost the same. This relevant similarly named coffee machine firm is still trading and is only listed, on the contract, as the supplier of the coffee machine. The actual owner of the coffee machine is listed as a European Bank, on the contract.

 

The contract is titled "Hire Agreement regulated by the Consumer Credit Act 1974". However, the contract then goes on to declare an "exemption relating to businesses" so that the Consumer Credit Act 1974 does not apply.

 

I am finding the bit of contract we have got quite difficult to decipher but, I think my friend may be stuck with it. All references to clauses we have not got seem to infer that they are tying up my friend even further since she has apparently signed for the fact that they are "reasonable"

[ssparks2003]

Is your friend a limited company or a sole trader/partnership, The Consumer Credit Act does not apply to an offer or supply of credit to limited companies, however it does apply to contracts entered into by sole traders and partnerships. and just because a company tries to absolve themselves of their legal responsibility it does not always make it so.

[stillstanding25]

She is definitely not a limited company. I think she must be a sole trader.

[stillstanding25]

What confuses me most about this contract is that it is a "Hire Agreement" but is apparently covered by the "Consumer Credit Act". It goes on about rental payments too.

I cannot work out if it is renting, buying or hire purchase. Also, not sure where it fits in to Consumer Credit Act which is another confusing document.

If it is rental, their should there be some way to give rental notice period. If it is Credit, should it not say APR and early payment stuff?

My friend was told that she could pay off an outstanding amount any time she wanted to.

However, the contract just mentions a fix term for rental of over 3 years.

Sadly, my friend is even less able to work it out than I am

[ericsbrother]

first thing to do is go to the bank and stop the payments going out.

A company in administration cannot enter into new agreements without the express permission of the administrator so there is a good chance that fraud is involved in this. Find out who the administrators are and make a complaint and demand the money back. The police may have to become involved.