The recent High Court decision in Neocleous v Rees [2019] EWHC 2462 (CH) held that a binding contract was created (perhaps unintentionally by one of the parties) because the sender’s email automatically created an email signature when the email was sent. Given it's common practice nowadays that senders of business emails also include an electronic signature when the send button is clicked, this case highlights a potential ramification of using automated signatures.
BACKGROUND
The parties to the dispute owned adjoining plots of land bordering Lake Windermere. The Defendant’s plot included a landing jetty; however, it was only accessible on land by crossing the Claimant’s property.
The landing jetty was landlocked, with the result that a dispute ensued over whether the Defendant had a legal right of way over the Claimant’s property.
In the lead up to the hearing settlement discussions took place via the parties’ respective solicitors. A proposal was made that the Claimant would buy the landing plot from the Defendant.
On 8 March 2018 Mr Tear (Defendant’s solicitor) emailed Mr Wise (Claimant’s solicitor) setting out proposed terms which included offering to sell the landing plot for £200,000.
On the same day Mr Wise replied by email rejecting the offer, and suggesting the Defendant consider a lower offer otherwise the matter would proceed to a hearing as scheduled.
The following day (9 March) Mr Wise emailed Mr Tear offering £175,000 on behalf of the Claimant.
Following a short telephone call in which Mr Tear accepted the £175,000. Mr Tear emailed Mr Wise confirming the terms of settlement between the parties and setting out the terms of the agreement between them.
Mr Tear’s email ended as follows:
“Many thanks
David Tear
Solicitor and Director
For and on behalf of AWB Charlesworth Solicitors
[Contact details then followed]”
On the following Monday (12 March) Mr Wise replied as follows:
“Thank you for your email and I confirm my agreement with its contents.
Kind regards
Daniel”
As a result of the above, the hearing date was postponed.
On 16 March Mr Tear sent Mr Wise a first draft Consent Order presumably setting out the terms of settlement. The email was headed “subject to contract”. Mr Wise responded on 22 March with further amendments to the draft Consent Order.
Mr Tear did not reply to Mr Wise’s email and, instead, on 9 May Mr Tear emailed the Tribunal requesting that the hearing be re-listed.
In response, Mr Wise emailed the Tribunal confirming that, as far as the Claimant was concerned, the dispute had been settled and there was no basis for re-listing a hearing.
Thereafter, on 10 October 2018 the Claimant issued High Court proceedings seeking specific performance of the agreement which the Claimant argued had been reached based upon the email exchanges.
THE ISSUES
The Claimant asserted that the email exchanges amounted to a binding contract of compromise.
Because this was a disposition of land then the formalities of s2 of the Law of Property (Miscellaneous Provisions) Act 1989 (“LPA”) need to be complied with. One of those provisions is that the agreed document (or exchange of contracts) must be signed by or on behalf of each party to the contract.
The Defendant argued that the email exchanges (assuming it was an agreement) didn't comply with the LPA as it wasn’t signed by both parties.
The Claimant’s position was that the use of an automated footer rendered the document as “signed” so long as the inclusion of the name was for the purpose of giving authenticity to the document.
The Defendant’s solicitors used Microsoft Outlook for the management of emails, and the firm’s policy was to have an “automatic footer” applied to the end of every email sent from it. In this case, the footer created the sender's name, the firm name and contact details (see above).
Mr Tear accepted that by adding the words “Many thanks” above the footer he was giving his authority to the email.
THE LAW
Some authorities have confirmed that the insertion of a signature at the end of an email was enough to render a document “signed”. See in particular Pereira Fernandes SA v Mehta [2006] 1 WLR 1543, Re Stealth Construction Ltd [2012] 1 BCLC 297 and Golden Ocean Group Ltd v Salgocar Mining Industries Ltd [2012] 1WLR 3674.
In addition, interpretation can be drawn from the E-Signatures Directive 1999/93/EC, and the Electronic Communication Act 2000. These seek to give electronic signatures similar effect to a handwritten signature, but none purport to answer the question whether an electronic signature can satisfy a statutory signatory requirement.
The Judge also referred to the Law Commission Consultation Paper and its conclusions at paragraph 3.80:
"The review of the case law above demonstrates that electronic signatures have been found to satisfy a statutory requirement for a signature where there has been evidence of an intention to authenticate the document. Such findings have been made under the Law of Property Miscellaneous Provisions Act 1989, the Consumer Credit Act 1974 and the Statute of Frauds 1677. 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. It has been suggested that an email header may not be sufficient. However, it is arguable that even this may function as a signature if there was sufficient evidence to demonstrate an intention to authenticate the document."
Our provisional view is that the combination of EU law, statute and case law means that, under the current law, an electronic signature is capable of meeting a statutory requirement for a signature if an authenticating intention can be demonstrated."
The Judge felt that the key to whether an electronic signature was in fact a “signature” was whether the name was added with an authenticating intent.
In this case Mr Tear knew his name was being added to the email because the automatic footer was prefaced by Mr Tear manually typing the words “Many thanks”.
The Judge concluded by saying he saw no difficulty in it being a signature, provided an email’s footer is treated as being a sufficient act of signing. He made the following points:
(i) It is common ground that such a footer can only be present because of a conscious decision to insert the contents, albeit that that decision may have been made the subject of a general rule that automatically applied the contents in all cases. The recipient of such an email would therefore naturally conclude that the sender's details had been included as a means of identifying the sender with the contents of the email, since such a footer must have been added either as a result of a conscious decision in the particular case or a more general decision to add the footer in all cases.
(ii) The sender of the email is aware that their name is being applied as a footer. The recipient has no reason to think that the presence of the name as a signature is unknown to the sender.
(iii) The use of the words "Many Thanks" before the footer shows an intention to connect the name with the contents of the email.
(iv) The presence of the name and contact details is in the conventional style of a signature, at the end of the document.
Specific performance of the compromise agreement was therefore ordered.
COMMENT
This case provides not only a useful reminder to the meaning of “in writing” in the modern electronic based world, but it also provides a cautionary tale about switching off the brain in favour of an automated script incorporating a signature. The clue is in the word “signature” and Microsoft themselves refer to the automated function as an “Email signature”.
This case reminds both lawyers and their clients that they must always remain aware that signatures, automated or otherwise, can have the effect of creating legally binding agreements.
Whilst it may be instinctive to focus on the most important terms when negotiating a settlement arising out of a commercial dispute e.g. agreeing a sum of money by way of damages - it must be remembered, however, there are often other issues which also need to be addressed as part of the overall settlement.
Parties often don’t tackle these other issues initially, presumably in the expectation that they will be picked up and addressed by the parties subsequently within an expanded formal settlement agreement.
It is imperative, therefore, that if a party makes an offer which has a good chance of being accepted by the other side, but needs to go hand in hand with other terms of settlement, then the offering party should either set out every precise term of settlement or, alternatively, make an offer on the basis it is “without prejudice and subject to contract”. It is good practice to head any offer letter and all subsequent settlement communications in this way.
In addition, it's always advisable to include within the body of the letter whether the offer is conditional upon other terms also being agreed between the parties (detailing what they are), and clarifying whether the offer is also dependent upon the parties entering into a binding settlement agreement.
It is worth remembering that commercial contracts often contain variation provisions which state that a variation is only valid if one or other of the parties sign to that effect in writing. So, a contracting party thinking that a wet ink signature is required may be in for a surprise if contract variations are agreed in email exchanges using automated signatures when there wasn’t an intention to be bound. |
