Sign of the times?
15 / 01 / 2020
Beware that you don’t accidentally give away, or get more than you bargained for! An automatically generated email footer signature might be enough to create a legally binding contract for the sale of land where the terms of the deal are set out in the preceding chain of emails. In a recent case this has happened – somewhat to the parties’ surprise.
The requirements that must be satisfied when a contract for the sale of an interest in land is entered in to are set out in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Broadly this requires that the contract: be in writing, incorporate all terms expressly agreed between the parties in one document and be signed by the parties.
The stipulation that the document be signed by the parties traditionally meant signed in “wet ink”. However we are no longer confined to traditional means and technological advances are such that electronic signatures can now be used to sign a document.
The almost simultaneous arrival of the Law Commission Report of 4th September 2019 on Electronic Execution of Documents and the case of Neocleous v Rees  EWHC 2462 (Ch) have thrust the issue of the validity of electronic signatures into the limelight once again. Technology is developing at such a rate that the law is inevitably left to play catch up.
In Neocleous two neighbours who lived adjacent to Lake Windermere, were engaged in a dispute over a right of way for half a decade. The argument appeared to be put to bed in March 2018 when the eventual claimant offered to purchase the piece of land that was at issue. On Friday 9th March the defendant sent an email in response to this offer, confirming the terms of it and requesting confirmation that the terms were agreed. The following Monday, 12th March the claimant replied again via email and confirmed the terms were agreed. A tribunal hearing that had been scheduled for May 2018 intended to resolve the dispute was cancelled and the parties set about documenting the agreement.
However, the defendant subsequently got cold feet and sought to have the matter relisted by the tribunal. The claimant contended that a valid contract had been entered into and thus sought performance of it. They alleged that read as a combined thread and by collating the information in each of them, the emails sent in early March 2018 formed a single document. They further claimed that the electronic signature at the bottom of each email could be interpreted as a valid signature, thus satisfying section 2 of the 1989 Act. What is particularly interesting in this case is that, the defendant’s solicitor was “signing” his emails using an automatically generated email footer.
The defendant claimed that because his signature was automatically generated, it was applied without any intent on his behalf. This wasn’t accepted by the court. Throughout the course of the correspondence he signed his emails “Many thanks” and omitted writing his name, in the knowledge that it would be displayed by his email footer. This, according to the Judge, showed an intention to connect the name with the contents of the email. Moreover the court accepted that the emails which were all contained in a single thread could be combined so as to form a single document which satisfies the legal requirements of a binding contract.
This case serves as a clear warning to those working on real estate transactions and deals to err on the side of caution when emailing other parties in relation to the terms of any deal. Arguably, the most prudent way to do this is by expressly stating in the email that there is no intention that the contents of it be legally binding, for instance by marking it as “subject to contract”. However, it is worth noting that a caveat of this nature isn’t water tight because on occasion despite marking something as subject to contract, the parties may subsequently go on to do what they have agreed without a contract being drawn up first.
Neocleous highlights that it is important to be mindful of what you are writing and whether it reflects your ultimate intention. In this case the court looked at the function of emails rather than their form and it did not shirk from creating links between separate emails in order to create a binding contract.
How the principles of Neocleous will evolve is as yet uncertain, but with the ever increasing use of electronic signatures, what is certain is that this will not be the final word on the subject. For now Neocleous presents a clear reminder to take care when sending electronic correspondence. It is simply no longer possible to silo online conduct away from physical dealings. Whether acting as adviser, agent or client, make it explicitly clear what your instructions are and what you have authority to do, lest you get more than you bargained for.