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A sign of the times

A court rules that contracts for the sale of land can be created electronically by a chain of emails between solicitors, even where the signatures of the parties’ solicitors are appended automatically to those emails.

Background

Contracts for the sale of land (“property contracts”) have to be made in writing, incorporating all of the terms that the parties have agreed in one document and signed by each party to the contract (or, where contracts are exchanged, each party must sign one part). This requirement is set out in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

With the increasing use of electronic signatures, there has been an ongoing debate about the validity of property contracts that have been signed electronically. Cases have decided that contracts can arise from a chain of emails with email signatures, but none of them have specifically addressed property contracts. While, logically, those cases should apply equally to property contracts, there has been a lingering doubt that the courts might apply a different approach to contracts that have to comply with the requirements of section 2. This is not a fanciful doubt. In its recent report on the Electronic Execution of Documents (Law Com No 386), the Law Commission included several paragraphs distinguishing a case that might be taken to suggest that wet ink signatures are necessary for property contracts.

The Business and Property Court has now considered the question and concluded that a property contract set out in a chain of emails complies with section 2 and is enforceable. Although the case has a Chancery Division neutral citation, it appears to be a county court judgment. On that basis, it therefore would not create a binding precedent, but it is still helpful to know how the Business and Property Court views the issue.

Facts

In Neocleous v Rees, the parties were in dispute about the use of a right of way. As a means of settling the issue, proposals were set out in an email from Rees’ solicitors offering to transfer land to Neocleous. The name of the solicitor was automatically appended to the bottom of the email. Acceptance of the offer was emailed back by the solicitor acting for Neocleous. Again, the name of the solicitor was appended to the email.

The court had to consider whether these emails, taken together, could create a property contract that complied with section 2.

There was no dispute that the emails showed an intention to create an agreement for sale and incorporated all the terms of the deal. The only question for the court to decide was whether that agreement had been signed by both parties.

Decision

The court held that, in order for a contract to be signed for the purposes of section 2, a wet ink signature is not needed. As the Law Commission had suggested, what was required was that a name is added with authenticating intent. The fact that a signatory’s name was added automatically to the email did not prevent there being an authenticating intent. The sender of the email was aware that his signature was being added. Even though it was added as a general rule applying to all emails, there was a conscious decision to use that rule. Even typing “Many thanks” at the end of the email showed an intention to link the contents of the email to the name. With the authenticating intent established, there was an enforceable contract.

Comment

The decision is helpful. There are times when it is more convenient for the parties to a contract to use electronic signatures or exchanges of emails. Had the case been decided in the High Court, it would have set a binding precedent. As a County Court judgment, it is persuasive but another court could reach a different conclusion, though this may be unlikely.

In this case, the parties intended (at the time, anyway) to commit themselves to the sale of the property. However, the case does highlight the need to ensure that correspondence between solicitors is marked “subject to contract”, where appropriate, to prevent contracts arising in correspondence between solicitors. When all correspondence took place by letter, “Subject to Contract” was added at the top of letters as a matter of course. However, with the informality and different structure of an email, this is easy to overlook.

Neocleous v Rees [2019] EWHC 2462 (Ch).

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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