Has the law of contract been compromised?

20 February 2020

A cautionary tale can be learnt from case of Neocleous v Christine Rees [2019] EWHC 2462 (Ch) a decision of the Manchester County Court which demonstrates how binding contracts can be inadvertently formed through the exchange of emails. Neocleous was a timely decision as it followed shortly after the publication of the Law Commission’s 4 September 2019 report Electronic execution of documents that the law now recognises a variety of different electronic signatures as legally binding.

The facts/issue

Whilst the decision in Neocleous was fact sensitive, the key point was whether an offer to settle a claim by way of the sale of the Defendant’s land to the Claimants for £175,000 had been accepted. If so, as the settlement involved the sale/disposition of an interest in land it was argued that it needed to comply with the formalities in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (the “LP(MP)A”).

The Defendant alleged the putative contract was not LP(MP)A compliant. The key issue in dispute at trial was whether the requirement in section 2(3) LP(MP)A that contracts for the sale/disposal of an interest in land must be signed by or on behalf of both parties had been satisfied. There was no single document containing all the terms agreed and physically signed by both parties and the putative contract had been formed by an exchange of open emails between the parties’ solicitors. These emails contained automatically generated email footers containing the solicitor’s name, occupation, role and contact details and that it was sent for and on behalf of their firm. The emails were not “signed” in any traditional sense. The Defendant argued that this meant that there had been no signature which would satisfy the LP(MP)A.

The Court’s finding

The Court disagreed, finding that a binding contract had been formed and the Court ordered specific performance, requiring the Defendant to sell her land to the Claimant. The contract had been formed, compliant with the formalities of the LP(MP)A, by the sending and receipt of emails between the parties’ solicitors on 9 and 12 March. They were i) clearly in writing and ii) taken together could amount to one single document containing all the terms. The first two requirements in the LP(MP)A were met.

As for the requirement for the contract to be signed the Court found that the important factor was not whether a contract was physically signed in the traditional sense but whether there was an intention to authenticate the document.

In this case, both solicitors did intend to authenticate. The Defendant’s solicitor had signed off his email accepting the terms of the offer by typing the words “Many thanks” and was relying upon the email footer (containing his name, details and that it was sent for and on behalf of his firm) to be automatically inserted when it was sent. There was intention to connect his name with the contents of the email – to authenticate it or to sign it.

Comment

Whilst this was a classic example of a case decided on its specific facts it also demonstrates the general direction of the law towards accepting a variety of different forms of electronic signatures in contracts.

It is also a cautionary tale to practitioners (or any negotiating party for that matter) to be mindful to carefully mark their settlement communications “subject to contact” and “without prejudice”.

If the solicitors had marked their 9 and 12 March emails “subject to contract” the outcome of the case could have been entirely different. One might also query whether the result would have been the same had the automatic footer at the bottom of the emails included wording along the lines of “This is not intended to be an electronic signature”. Would this have vitiated any intention to authenticate?

 

Further information

For further information, please contact Daniel Staunton or a member of our Dispute Resolution team.

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