Property lawyers take great care in ensuring that the correct formalities are complied with in order to create a valid contract for the sale of land. However, now that we are in the digital age, people must also take care to ensure they do not inadvertently create valid contracts for the sale of land. The recent case of Neocleous and another v Rees (2019) has provided a cautionary tale.
To assess the impact of this case, first consider the legal requirement for a contract for the sale of land; it must (a) be in writing, (b) contain all of the agreed terms and (c) be signed by or on behalf of the parties.
That final item (i.e. be signed by or on behalf of the parties) has become a hot topic. The previously accepted approach to the “signing of a document” required the writing of one’s name or mark in one’s own hand in pen and on paper. However, as technology changes, and new technologies come into existence, the courts have to review that approach and “move with the times”.
The courts have already shown willing to address this issue. In the 2006 case of J Pereira Fernandes SA v Mehta, the courts were prepared to accept (in principle) that an electronic signature could satisfy the requirements of section 4 of the Statute of Frauds 1677. Likewise, in 2017 the Law Commission launched its project on electronic or e-signatures, and in 2019 issued its report “Electronic Execution of Documents”.
The burning question in Neocleous was whether an automatically-generated signature in an email footer could satisfy the formal signature requirements, and thereby constitute a ‘signed’ contract, for the purposes of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
The case arose from a right of way dispute. In order to reach a settlement, the claimants sought to buy out a plot of land from the defendant. Following negotiation, the parties reached a compromise. The compromise was set out in emails between the parties’ solicitors. Each email concluded with: many thanks/kind regards, the name of the solicitor, their role, the name of their firm, and contact details. The claimants sued for enforcement of the compromise. The defendant’s argued that the compromise did not satisfy the formality requirements in section 2, stating it was a contract for the sale of land and must therefore be signed by or on behalf of each of the parties.
Taking the approach of the Law Commission’s report, the court believed that the key question was “had the (signing parties’) name (i.e. the email signature) been applied with authenticating intent’, i.e. “was there a conscious action of a person to apply the name”?
The court stated that, although the software generated the name (email signature) by default, it did so following the ‘conscious action at some stage of a person entering the relevant information and settings in Microsoft Outlook’. The court determined that this conscious action provided the necessary “authenticating intent”. Objectively, the "presence of the name indicated a clear intention to associate oneself with the email—to authenticate it or to sign it”. As such, the formality requirements were deemed to be satisfied.
(Unintended) consequences of this decision could be far-reaching. Umpteen emails with automatic signatures attached are sent and received daily. It is now likely that those emails are classed as being ‘signed’ for the purposes of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (and potentially also for other legislation with similar formality requirements).
As such, all those with an email signature that (by default) inserts their name should take time to ask themselves whether they really intend to authenticate the content of that email. If not, one should ensure that all pre-contract email exchanges should be headed ‘subject to contract’ to avoid unintended consequences.