General manager personally liable for the company's non-paymentto pay

The general manager and sole board member of a company in the construction sector ordered goods on credit in the summer of 2022. The goods were delivered as agreed, but the company did not pay the purchase price.

Shortly after the turn of the year 2023, the company was declared bankrupt.

The supplier brought an action against the general manager of the purchasing company, claiming damages for the loss arising from the company’s non‑payment for the goods. In the Court of Appeal, the general manager was ordered to compensate the loss.

The Supreme Court reached the same conclusion as the Court of Appeal. There were strong indications that the general manager had acted in a manner giving rise to liability through his responsibility for the company’s financial management. However, the Supreme Court did not find it necessary to take a final position on this, as the general manager had in any event acted in a manner giving rise to liability at the time the goods were ordered. When the supplier inquired about the company’s ability to pay, the general manager stated that financing was in place and that there was no cause for concern.

The Supreme Court stated that refraining from providing incorrect or misleading information lies at the core of the duty of loyalty in contractual relationships.

Intentional or negligent breaches of this duty may give rise to liability for damages. The general manager’s latitude in attempting to save the company from bankruptcy did not exempt him from personal liability.

The judgment sheds light on management’s duty to act when a company is in financial difficulty and on disclosure obligations in contractual relationships.

Read the judgment of the Supreme Court (Norwegian only) (PDF)

Areas of law: Contract law and insolvency

Key paragraphs: 30, 46–49

Justices: Bull, Bergsjø, Østensen Berglund, Thyness and Hellerslia