Court decision – are electronic signatures by email enforceable for the purposes of a property contract?

The recent case of Neocleous v Rees [2019] EWHC 2462 (Ch) is the first reported judgment that specifically considers whether an electronic signature by email is enforceable for the purposes of a property contract (section 2 of the Law of Property (Miscellaneous Provisions) Act 1989).

Background

The parties had agreed to resolve an ongoing dispute by way of a proposed sale of the defendant’s land to the claimant. They negotiated the terms of their settlement via a series of emails between their solicitors. Despite email confirmation that the terms were agreed, no separate document was finalised in support of this.

The defendant subsequently claimed that they had not reached an agreed settlement and re-listed their dispute for a hearing. The claimant argued that the emails between the parties’ solicitors amounted to a contract and sought specific performance of the property contract.

Law of Property (Miscellaneous Provisions) Act 1989 (LPM)

Section 2 of LPM provides that contracts for the sale of land must:

1. be in writing;
2. incorporate all terms expressly agreed in one document; and
3. be signed by or on behalf of each party to the contract.

It was argued that the series of emails between the parties’ solicitors constituted one single document setting out the agreed terms, in writing, and that the electronic signatures at the footer of the emails fell within the meaning of ‘signed’ under the third limb of section 2 of LPM.

Issues

In considering the meaning of ‘signed’, the defendant pointed to the principles established by Firstpost Homes Ltd v Johnson [1995] 1 WLR 157 and put forward the following arguments:

1. the meaning of signature is to be determined by whether an ‘ordinary man’ would consider a document to have been signed without the need to engage solicitors i.e. the signature must be made in the hand of the author (even if it is, for example, a scanned copy of a wet ink signature);
2. the signature should be deliberately applied and does not apply to automatically generated footers.

Conclusion

However, the Court held that the email signature was sufficient to meet the third requirement of section 2 of LPM and the claimant was entitled to specific performance of the contract. This decision was based on the following:

1. the ordinary usage of words develops over time; therefore, the word ‘signature’ no longer requires a handwritten name and is capable of encompassing the signature at the footer of the email, which sets out the sender’s name, occupation, role, and contact details;
2. an automatically generated footer in the email does not necessarily mean that there was no intention for the signature to be ‘deliberately’ applied. The following reasonings were given in support of this:

• the steps taken to set up a rule that automatically applies a signature at the footer of all emails constitutes a conscious decision to be identifiable as the sender by the details included in the signature;
• the sender of the email was aware that their name was being applied to the footer and the recipient has no reason to question this, nor does the recipient have any way of knowing whether the footer was added automatically or manually;
• the use of the words ‘many thanks’ before the footer indicates an intention to connect the contents of the email to the sender’s name;
• in the conventional style of a signature, the signature was positioned at the end of the document.

Commentary

In a world where it is increasingly common for electronic signatures to be automatically generated, this judgment indicates the importance of ensuring that all email correspondence of this nature includes wording to the effect of being ‘subject to contract’ and/or disclaimers against any intention for such emails to be binding.

Note that the judgment was handed down by Manchester County Court (despite the High Court citation). Therefore, the judgment is not binding in subsequent rulings at county court or decisions of higher courts but should be seen as a warning for all property solicitors.

For further information, please contact Cherry Ho