21 October 2019

Digitising disputes – 10 of 14 Insights

Electronic signatures: an attempt to renege on a contract using formalities

  • Briefing

In Neocleous and another v Rees [2019] EWHC 2462 (Ch), the Court considered whether a standard email signature, containing the sender's name, position and firm contact details, would satisfy the statutory formalities for contracts to transfer land, which state that the contract must be "signed".

The Court reviewed the relevant case law and the terms expressed in the relevant emails, before concluding that the email signature was sufficient to comply with the signing formality. In coming to this conclusion, the Court has shown some willingness to avoid a ridged/technical approach to the meaning of the word 'signed', which is encouraging. Nevertheless, where real estate is concerned and formalities are typically onerous, it will usually be best to avoid such disputes by adopting more conventional methods of contract execution.

The facts

A dispute originally arose between the parties concerning a right of way to access a landing plot/mooring on Lake Windermere. Proceedings were issued at the First Tier Tribunal in this dispute but shortly before the trial, the parties engaged in negotiations to try to settle the matter.

By an exchange of emails in March 2018, the parties' solicitors agreed on their clients' behalf that, in full and final settlement of the claim, the relevant landing plot would be sold to the claimants and a right of way previously used by the defendants would be released.

In order to bring the proceedings to an end, the claimant's solicitor prepared a draft form of consent order for the defendant's solicitor to review. However, the defendant refused to sign the order and sought to renege on the agreement to settle the case. The claimants therefore issued proceedings for specific performance of the settlement agreement contained in the March 2018 emails.

Issues before the Court

The defendant accepted that the emails that passed between the parties' solicitors would have formed a binding contract, but argued that section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 prevented this contract from being enforceable. Section 2(1) of the 1989 Act provides, in so far is relevant:

“(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all of the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.

…(3) The documents incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract."

In short, the key element of the defence was that the emails had not been signed for the purposes of the 1989 Act. It was pointed out that the email "signature" had been added automatically and that there was no prior authority on the point.

On the other hand, the claimants argued that their solicitor's email signature was sufficient. It was noted that the signature contained the individual's name, occupation, role and contact details and that the parties had both shown a clear intention to create a contract.

The Court noted that the position taken by the defendant was less than attractive. It was obvious that the defendant was simply trying to get out of a deal using an argument based on a "serendipitous legal defect in formality". The effect of this had also been to avoid a scheduled trial of the underlying matter, as the claimants had thought that the matter was settled. Nevertheless, these were not reasons that the Court could rely on to answer the key question, which was whether the emails satisfied the formalities in the 1989 Act.

The decision

The Court found for the claimants and held that the March 2018 emails constituted a binding contract for the purposes of the 1989 Act. In coming to this view, the Court reviewed prior authority from the Courts confirming that an email signature could be a signature for the purposes of a contract in English law. There was no reason that this analysis could not extend to the 1989 Act, the policy of which was provide that there be a clear "intention to authenticate".

The Court also noted that the meaning of signature may have changed with the times. Quoting a consultation paper from the Law Commission:

"A finding of validity of an electronic signature does not appear to be limited to a particular type of signature – a typed name at the end of an email is sufficient, as is clicking an “I accept” button on a website."

Applied to the present case, the Court concluded that:

  • The email signature had been included automatically, but only because a rule had been set up by the claimants solicitor to make this happen. In any event, it was not possible for the recipient to know whether it had been added automatically just by reviewing the email.
  • The claimant's solicitor knew that the signature was being applied.
  • The claimant's solicitor had written "Many thanks" before his signature, connecting the content of the email to the signature itself.
  • All of the claimant's solicitor's details were contained in the signature (rather than in the body of the email, as if to merely provide contact details).

Our comment

Though only an authority from the County Court, it could be said this case demonstrates the Court's willingness to ensure that the law remains fit for purpose in the digital age. On the other hand, the defendant's argument was not particularly meritorious and it may be possible to distinguish the decision on its facts, perhaps if the signature block in question does not contain the same information. In any event, standard execution of real estate contracts looks set to stay, at least for the time being.

Find out more

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