Background
In the case of Neocleous v Rees, the parties had been involved in a long-running dispute about a right of way. A compromise was eventually reached in which Mr and Mrs Neocleous agreed to buy a piece of land from Mrs Rees and, following the settlement, the case was withdrawn from the tribunal.
The terms of the settlement were set out in an exchange of emails between each party’s solicitors rather than a hard copy agreement. Each email concluded with the solicitor’s name, the name of the firm and its telephone number.
After the terms of the settlement had been agreed, Mrs Rees decided that she did not want to sell the land. Mr and Mrs Neocleous applied to court for an order that the land should be transferred but Mrs Rees defended the claim on the basis that the emails did not constitute a contract because the automatic signature added to each solicitor’s email was not binding.
High Court Decision
An enforceable contract for the sale of land requires all of the terms of the sale to be recorded in writing and for the document to be signed by each party. Mrs Rees argued that, in order for a contract to be created, a handwritten rather than electronic signature was needed.
When considering whether an electronic signature could bind the parties, the court recognised that the ordinary use of words such as ‘signature’ had a tendency to develop over time and that a person receiving an email would reasonably consider that it had been signed. In the current age of mass email communication, the addition of the electronic signature showed a clear intention to link the contents of the email to the sender.
In deciding that an electronic signature was sufficient to create a contract for the sale of land, the court noted the following features of the email exchanges:
- The sender of the email had made a conscious decision to add their signature to each email using the settings available in Microsoft Outlook
- The recipient of the email had no reason to think that the electronic signature had not been added intentionally
- The solicitor acting for Mr and Mrs Neocleous had used the words ‘many thanks’ just before the signature and this served to connect its contents with the signature and to demonstrate to the recipient that the sender endorsed the email on behalf of his client.
Conclusion
The court might have been particularly keen to intervene in this case because Mrs Rees unreasonably attempted to withdraw from the settlement agreement but the decision illustrates the risks of careless email exchanges.
When sending any written communication to negotiate the sale of property or any commercial transaction, the correspondence should be marked ‘subject to contract’ in order to try to avoid a contract being formed. If long email chains can be avoided then this might also prevent a contract for the sale of land being formed because all the terms of the agreement will not be included in one document.
The solicitors acting for the parties could also have made clear that they were not authorised to enter into a contract on behalf of their clients, and that the terms of the transfer would need to be recorded in a hard copy agreement to be signed with a traditional ‘wet’ signature which would be exchanged and completed in the usual way.
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