Most of us are aware that certain formalities need to be complied with before a valid contract for the sale of land can be created. However, in this digital age, is it possible to create such a contract by exchange of emails? Such a case appeared before the courts recently and to avoid that happening to you, we offer some guidance that you should adopt.
The legal requirements
For a contract for the sale of land to be valid, it must
Be in writing
Contain or incorporate all of the agreed terms and
Be signed by or on behalf of the parties.
It is easy to imagine an exchange of emails could contain all the terms relating to the sale of land. For example, an email or thread could confirm the names of the parties; the price; details of the property; and the proposed completion date.
However, an email does not contain a signature. Therefore, you would expect it would not be possible to create a valid contract for sale through emails alone.
Correct approach to the meaning of ‘signed’
The accepted approach to the meaning of ‘signed’ is that it requires a handwritten name (or at least a scanned or facsimile copy of such handwriting). The courts, until recently, have construed this as meaning someone must write their name with their own hand on the document in question. By signing a document, the signatory has indicated their willingness to be bound by its terms.
However, the courts have to review this approach as new technologies have emerged. For example, when ordering goods online, a click on ‘Accept’ can constitute an acceptance of the seller’s terms and conditions.
The courts have said, in cases not dealing with property transactions, that the issue is whether the email or click on the website was intended to authenticate the transaction. Should this concept apply to the sale of land?
Neocleous v Rees
This case concerned a disputed right of way. The dispute was about to be heard before a tribunal.
The claimants sought to buy out a plot of land from the defendant in order to settle the proceedings. The price was agreed and the parties reached a compromise agreement. The hearing before the tribunal was discontinued.
The agreement was set out in a pair of emails between the parties’ respective solicitors. Each email concluded - many thanks/kind regards, the solicitor’s name, their role, the firm name, and contact details.
For some reason, the defendant later decided to renege on the agreement. The claimants sued for specific enforcement of the agreement.
The defendant’s case was that the agreement, though otherwise valid, fell foul of the formality requirements. It was argued that it was a contract for the sale of an interest in land and therefore ‘must be signed by or on behalf of each party to the contract’.
The question before the court was whether the exchange of emails constituted a ‘signature’ for the purposes of property law.
The court found
Under the settings of the solicitor’s email accounts, the relevant words [names, role etc.] were added automatically to every email.
Adding such information had been a conscious act by the person who created the rule
The recipient was unable to distinguish between a name added pursuant to the rule and a name added manually on each occasion.
The presence of the names, role etc. indicated a clear intention to authenticate the email or to sign it.
Therefore, the automatic email footer was a sufficient act of signing.
Accordingly, the court made an order requiring the defendant to complete the transaction.
Best practice for housing associations
To avoid inadvertently entering into a binding contract for the sale or purchase of land, consider using the following
At the outset, email the other side saying the author has no authority to enter into a binding contract for the sale and purchase of the property in question.
Mark your emails and Heads of Terms ‘subject to contract’
Avoid long email chains, which will mean you are far less likely to include all the terms of the transaction in one document.
In the case of Neocleous v Rees, the court tried its very best to find for the claimants because the conduct of the defendant in withdrawing from the agreement was unattractive and without merit. In the circumstances, in my opinion, the decision is correct and fair.
For the future, we should expect some statutory changes especially because the Law Commission has recommended allowing for the Electronic Execution of Documents. We shall report on this when there are further developments.