Signing by email ?

8th December 2011

Do you consider the legal implications that might arise following a simple click to send an email ?

A recent High Court decision has suggested that it might be wise that you consider the legal implications that might arise following a simple click to send an email, holding that an exchange of emails may, in some circumstances, satisfy requirements to leave you contractually bound by the contents of what is written. There are certain formalities that must be adhered to for the valid creation of real estate contracts. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 exists to protect individuals from entering into a contract accidently, and thus avoids legal rights being created inadvertently. The requirements set out in section 2 specify that the contract must incorporate all the terms agreed by the parties, be signed by all the parties, and be in writing. In Green (Liquidator of Stealth Construction Limited) v Ireland1, the High Court suggested that an exchange of emails may, in some circumstances, satisfy the requirements of section 2. The email correspondence in this case was between two sisters and concerned a legal charge granted to one of the sisters (I) by the other over a property belonging to a company that was part-owned by the other sister (G). In December 2008, G was granted a legal charge over the property, having lent the company £300,000 towards the purchase. In June 2009 the company entered liquidation, and the liquidator claimed that the charge was a preference that should be set aside under the Insolvency Act 1986. I argued that the creation of the charge did not constitute a preference, as it had been executed pursuant to an agreement giving her an entitlement to the charge, such an agreement being contained in an exchange of emails between G and I prior to the insolvency. It was held that the charge was a preference and consequently it was set aside. The judge found that there was no contract created between the sisters due to the fact that the emails did not contain all the terms as orally agreed between them. However, the judge did continue on to consider whether the emails had been signed in accordance with section 2. The judge saw no reason to move away from the reasoning in the 2006 case J Pereira Fernandes SA v Mehta2, and it was accepted that by inserting their names at the end of their respective emails, the sisters had 'signed' them for the purposes of section 2. The High Court decision will not itself create new law, but it serves as a notice of caution as to the mind set of the courts towards the increasing trend in electronic communication in the modern world. Although there has yet to be a case where parties have been found to have exchanged land contracts by email, the case indicates that the court are willing to consider that there may soon be a time when a name at the bottom of an email is sufficient to create a contract for the transfer of an interest in land. Those involved in email communication concerning the exchange of land contracts should take care when negotiating in this format to avoid potentially committing themselves to legal obligations that they did not intend. Those involved in such negotiations should mark emails as subject to contract to avoid any confusion as to when the agreement becomes legally binding. For additional information please contact Justin Emerson of Gepp & Sons on 01245 228113. The above is not legal advice; it is intended to provide information of general interest about current legal issues. 1 [2011] EWHC 1305 (Ch) 2 [2006] EWHC 813 (Ch)