A recent case, Neocleous v Rees (2019), has explored whether a binding contract for the sale of land can be entered into by way of an email exchange between lawyers.
With email being the most regularly used mode of communication in an increasingly digital world, this case explores the balance between legal requirement and the increased adoption of electronic signatures.
Legal Requirements
The law requires that any contract for the sale of land must:-
- be in writing;
- detail all the terms agreed between the parties; and
- be signed by or on behalf of the parties[1].
Case Background
The parties were neighbours, with the Defendant claiming it had the benefit of a right of way over the Claimant’s land. The right of way was used by the Defendant as its means of access to one part of its property. Whilst the benefit of that right of way was noted on the title to the Defendant’s registered property, the Claimant’s land was not expressed to be subject to the right of way.
After an unsuccessful attempt was made by the Defendant to register the right against the Claimant’s land, the matter was referred to the First Tier Tribunal for settlement.
Before the tribunal hearing, the parties began discussing a potential settlement whereby the Defendant would sell part of its land to the Claimant in full and final settlement of the tribunal proceedings. Terms were agreed and outlined in an email exchange between the parties’ lawyers.
The initial relevant email was sent by the Defendant’s solicitor setting out the key commercial terms, and the email was signed off with the phrase “Many thanks” which was followed by the solicitor’s auto-signature giving the solicitor’s name, position and contact details. A response from the Claimant’s solicitor confirmed agreement of the terms and it was signed off “Kind Regards” following by the solicitor’s auto-signature details.
The parties sought to vacate the hearing, but after document negotiations halted, the Defendant sought to relist the hearing. The Claimant, however, considered there were no grounds to relist the hearing as a settlement had been reached and subsequently brought proceedings claiming the email exchange between lawyers satisfied the legal requirements to create a binding contract for the sale of land.
After other points were settled before the matter came to trial, the only question before the court was: has the signature element needed to create a binding contract for the sale of land been satisfied?
Judgment
The Judge found that the contract contained in the email exchange had been signed on behalf of the parties and therefore ordered specific performance of the contract.
Commentary
The question of what qualifies as “signed” has been considered widely in legislation, case law and legal commentary.
The judge in this case dismissed the Defendant’s argument that a signature must be handwritten as his view was that the term “signed” must be given the meaning an ordinary person would consider it to have and that the ordinary usage of words has a tendency to develop, with many people now considering that the information stored in a Microsoft Outlook “Signature” function would qualify as a signature. The judge concluded that the relevant test as to whether documents are signed was outlined in a 2016 case[2] which provided that signatures can come in various forms, providing always that whatever form is used, it is inserted “in order to give and with the intention of giving, authenticity to [the document]. Its inclusion must have been intended as a signature for these purposes…”
The Defendant’s solicitor also claimed that the relevant email had not been “signed” as his e-signature was not consciously typed, but rather included as an automatic rule (i.e. by way of a Microsoft Outlook “Signature” or an email footer). This was quickly dismissed by the judge on the grounds that at some level a conscious decision was made to ensure signatures were added to emails as a means of associating the sender’s name with the content of the email.
The findings of the Law Commission’s consultation paper (and now published report) “Electronic Execution of Documents” was also relevant to the decision in this case. This resource summarises that legislation and case law demonstrates that electronic signatures are capable in law of being used to validly execute documents and electronic signatures should have the equivalent effect as a handwritten signature. The legislative and case law sources refer to the need for the e-signature to be applied to give authenticity to the document to which it is applied. The judge in this case concluded that, considered objectively, the use of the e-signature indicated a clear intention by the solicitors to associate themselves with the email “to authenticate it or to sign it”.
The decision of the judge in this case to recognise email auto-signatures as signatures capable of binding parties to a contract for the sale of land demonstrates the increased willingness of courts to accept e-signatures as a means of signing binding documents.
Whilst this case considers correspondence between solicitors, no distinction has been drawn between correspondence between solicitors, and correspondence directly between contracting parties. Until the point is tested, care should be taken when parties are negotiating terms via email or other electronic methods to avoid inadvertently entering into a binding contract and consideration should be given to stating clearly that correspondence is “subject to contract”.
[1] S. 2(1) and 2(3) of the Law of Property (Miscellaneous Provisions) Act 1989.
[2] J Pereira Fernandes SA v Mehta [2016] 1 WLR 1543