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Electronic execution: take care before hitting "send" - automatic email signatures can form legally binding contracts

Electronic signatures are becoming increasingly commonplace in the 21st century as advances in technology change the way in which consumers and businesses enter into binding transactions. Vivian Lee and Robert Goodlad consider the recent case of Neocleous and Another v Rees [2019] EWHC 2462 (Ch), in which the Court decided that an automated email signature block at the end of an email created a binding contract for the sale of land.

Background

Mr and Mrs Neocleous, the Claimants, were involved in a land dispute with Ms Rees, the Defendant, over a right of way. The matter was listed to be heard by Tribunal, but prior to the hearing Mr Wise, the Claimants' solicitor, offered to settle the dispute by purchasing a piece of the Defendant's land for £175,000. This offer was initially accepted by Mr Tear, the Defendant's solicitor, during a telephone call on 9 March 2018. Later that day, Mr Tear emailed Mr Wise the terms of settlement, signing off the email with 'Many thanks' and an automatically generated Microsoft Outlook signature block which included his name, position, department, firm name, and contact details. The Tribunal was then notified and the listed hearing was vacated.

In the event the Defendant failed to complete the purchase and argued there was no binding settlement agreement because the requisite execution formalities had not been complied with. The Claimants contended that the email chain comprised a contract which had been signed by the insertion of an automatically generated footer containing the name and contact details of the sender.  As the case concerned the disposition of an interest in land, the Court were asked to consider whether Mr Tear's automatically generated name at the foot of the email constituted a signature for the purposes of section 2(3) of the Law of Property (Miscellaneous Provisions) Act 1989.

High Court Decision

The Court decided that an automated 'email footer' electronic signature could be valid. In ruling for the Claimants, HHJ Pearce held that whether something amounts to a signature should be approached using the test identified in J Pereira Fernandes SA v Mehta [2006] EWHC 813 (Ch) (which had also been adopted by the Law Commission in its Electronic Execution of Documents Report – see below), namely whether the name was applied with authenticating intent.

The Defendant had argued that the definition of 'signed' should be determined on the alleged meaning of that word to the ordinary person, following Firstpost Homes Ltd v Johnston [1995] 1 WLR 157, and therefore required at least a facsimile of handwriting. This reasoning was not accepted. HHJ Pearce instead emphasised that the ordinary usage of words has a tendency to develop, and in the current age, a 'signature' is capable of encompassing the wording in the footer of an email.

The fact that the footer was created automatically in every email did not diminish Mr Tear's authenticating intent. He was aware his name was being applied when sending the email and setting up the automatic signature block in Microsoft Outlook involved a conscious action by Mr Tear at some stage. Mr Tear's manual typing of the words 'Many thanks' before the footer further showed an intention to connect his name with the contents of the email. Furthermore, the recipient of the email, Mr Wise, had no way of knowing whether the signature block was added pursuant to an automatic rule as in this case, or by the sender manually entering it. The Court noted that, on the face of it, the Defendant's argument sought to use a "serendipitous technical defect in formality to renege upon a deal".

For these reasons, the Court found Mr Tear's automatically generated name at the end of the email on 9 March 2018 to be a proof of signature and sufficient to create a binding contract under Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The Claimants were therefore entitled to the order of specific performance which they sought. 

Comment

Whilst this case arose due to the formalities that are required for a contract which involves the disposition of land, the case very much reflects modern times and the move away from a traditional understanding of a signature on a contract. The judgment was delivered shortly after the Law Commission's Report on the Electronic Execution of Documents was published. In that report, the Law Commission confirmed the legal validity of electronic signatures and the fact that the common law takes a pragmatic approach by generally not prescribing any particular form or type of signature for execution purposes. The correct approach, as reiterated by HHJ Pearce, is to consider whether the sender had an 'intention to authenticate' or in other words, intention to sign and be bound by the document signed.

By widening the scope of what amounts to a 'signature', the courts are showing a willingness to enforce bargains made at arm's length reached between parties even if such bargains are not set out in a formal 'traditional' contract.

In the insurance industry, there has been no consistent attitude to electronic signatures amongst insurers. Increased confidence in electronic execution is likely to increase transaction efficiency, and to support further domestic and international growth. Indeed, digital working is a key part of the recently launched Lloyd's Blueprint One, which is intended to make Lloyd's the most advanced insurance marketplace in the World. Continued monitoring will be needed as electronic execution may be vulnerable to fraud in certain situations. While convenient, therefore, electronic execution may not be appropriate or desirable all situations.

In general, the decision in Neocleous v Rees serves also as a reminder for all professionals to take care in the words they say, use, or send, and to ensure that recipients understand when one's correspondence is a formal letter of offer and when it is a mere proposal for discussion at a pre-contract stage.

Contact

For further information please contact Robert Goodlad, Director Robert.Goodlad@dwf.law , T: +44 (0) 20 7280 8829 or Vivian Lee, Trainee Solicitor Vivian.Lee@dwf.law  T: +44 (0) 20 7645 9624.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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