18 March 2020

Choose your words wisely when you have an Automatic Email Signature

Neocleous & Anor v Rees [2019] EWHC 2462 (Ch)

A cautionary tale of negotiating terms for the sale of land by email unfolded in the Manchester County Court (“MCC”) in September 2019.  The key question being whether an automatically generated email footer was capable of constituting a valid signature on a document for the purposes of the Law of Property (Miscellaneous Provisions) Act 1989 (“LPMPA”) in a transfer of land.  Section 2 of the LPMPA sets out the requirements that a contract must: 

(a) be in writing; 

(b) incorporate all the terms which the parties have expressly agreed; 

(c) be in one document, or where contracts are exchanged, in each document; and 

(d) be signed by or on behalf of each party.  

The MCC, finding against Mr. Rees, set a low threshold for complying with the formalities of section 2 of the LPMPA and highlighted the level of care that must be taken when negotiating terms over email for both individuals and professionals.  This approach mirrors the position taken in the UK Law Commission’s recent report on the “Electronic execution of documents”, that so long as the court believes a signature has been applied with the intent of authenticating a document, there is little significance given to the type of technology used to do it.  It was held that an automated signature at the bottom of an email could “sign” a document for the purposes of the LPMPA.  

The MCC also highlighted the importance of ensuring all pre-contractual correspondence is headed “subject to contract”, so that the parties on either side of a transaction do not inadvertently become contractually bound to proceed with a sale at a time when they may not be prepared to do so.  That said, this approach should also be viewed with caution.  The UK courts’ flexible and pragmatic approach to electronic signatures recently means that the wording “subject to contract” is not necessarily a complete defence – the court will still consider the intent and actions of both parties.   

Facts

A dispute had arisen between Mr Rees (the “Defendant”) who claimed a benefit of a right of way over land owned by Neocleous and Anor (the “Claimants”) in the UK’s Lake District.  To avoid going to a tribunal, the Claimants offered to buy a piece of the Defendant’s land to resolve the issue.  Settlement terms were subsequently agreed in a series of emails between the parties’ solicitors.  However, the Defendant later claimed that the settlement terms had not been finalised and fell short of complying with the formalities found in the LPMPA, so he wished to proceed to the tribunal.  

The final email from the Defendant’s solicitor outlined the terms of sale (including the price, the description of the property being sold and the requirement to use best endeavours to complete the transaction as soon as possible), and the Defendant’s solicitor’s name and details were included in the footer of the email (as is customary in most professional emails).  The Claimant’s solicitors replied via email confirming the Defendant’s acceptance of the agreed terms and again included their name and details in the email footer.  The MCC was asked to consider whether the email exchange between solicitors constituted a contract for the sale of land, and whether the automated email footers containing the solicitor’s signature amounted to a signature for the purposes of the LPMPA. 

Judgment

The MCC held that there was a valid contract for the sale of the land as there was offer, acceptance, consideration and the intention to create legal relations present.  The two emails in question, when combined together in an email chain, were held to be a single document.  In keeping with the general flexible approach taken by UK courts towards signatures, the MCC stated that a signature has the meaning that an “ordinary person” would ascribe to it, rejecting the argument from the Defendant that there must be a handwritten name.  Objectively, an ordinary person would consider that if someone utilised the automatic “signature” feature in Microsoft Outlook with the intention that it would appear at the bottom of every email, then this was indeed a “signature”. 

The MCC applied a test taken from J Pereira Fernandes SA v Mehta [2006] EWHC 813 (Ch) (the “Mehta test”), which required the MCC to consider whether the name was applied with the intent of authenticating the document.  Applying the Mehta test, it was held that the presence of the Defendant’s solicitor’s name which, whilst automated, had indicated a clear intention to associate themselves with the email, to authenticate or to sign it. 

Further, the Defendant’s solicitor had also written “Many thanks” before the footer, which the MCC believed showed an intention to connect the name with the contents of the email.  Similarly, as the position of the email footer was at the bottom of the document, it was considered to be in the conventional style of a signature, which was in contrast to another case in 1995 where it was held that a person’s name and address included at the top of a document could not be considered a signature (Firstpost Homes Ltd v Johnson [1995] 1 W.L.R 1567).  Having satisfied the necessary formalities of section 2 of the LPMPA, the MCC held that a binding agreement had been created between the parties for the transfer of the land.  

Athena Brands Ltd v Superdrug Stores PLC

Whilst preparing this summary, the UK’s High Court also delivered judgment at the beginning of this year on a two-email exchange whereby Athena Brands Limited asked Superdrug Stores PLC in an email to confirm the minimum order numbers being purchased and an employee at Superdrug replied to the email stating “Please go ahead with the below”.  

The Court held that the employee had held himself out to be authorised to negotiate the terms and, with no reason to question the scope of authority that the employee had at Superdrug, Athena had relied on that email confirmation as an intention to enter into a legally binding contract.  

So not only should employers watch out for accidentally binding a company by way of their email signature, one should make sure that those people communicating with suppliers, customers or any other party have the authority to deal with such arrangements in addition to sufficient training to avoid inadvertently entering into commercial contracts.

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