The Law Commission’s report on the electronic execution of documents which we reported on last week says that an electronic signature is capable in law of being used to execute a document, provided that the person signing the document intends to authenticate it and that all relevant formalities have been complied with.
Electronic signatures can take many forms. Could an exchange of emails, a back and forth thread between parties, containing the terms of a property sale be considered to be a binding contract? After all, how can it be said to satisfy the requirement for the contract to be signed by the parties (section 2 of the Law of Property (Miscellaneous Provisions) Act 1989)...?
A recently decided case has confirmed that it is possible for the necessary authenticating intent to be demonstrated where an electronic signature is contained at the foot of an email, even where that is an auto-signature added to the foot of every email sent by the sender without conscious thought to do so.
While the decision is only a county court ruling (and therefore not binding on other courts) and while the law in this area remains young and undeveloped, parties negotiating by email should be careful that an automated signature added by email software could be capable of showing the same authenticating intent (which has the same binding effect as a wet ink signature on a contract) as the deliberate act of manually typing their name at the bottom of the email.
The parties negotiating were solicitors acting on behalf of their principals and the courts may hold them to a higher standard than ordinary members of the public. However, other property professionals and landowners should still take note. In order to avoid inadvertently creating a binding arrangement, use of words such as “subject to contract” are more important than ever.