Faxed Missives Not Binding In Scotland: Deal Or No Deal
Aspects of English law on the mechanics of signing contracts has
been revisited recently with the case of R (on the application
of Mercury Tax Group and another) v HM Revenue and Customs
Commissioners and others [2008] All ER (D) 129 (Nov).
Now it's Scotland's turn.
The Court of Session ruling of Thomas Park and Another,
Petitioner [2009] CSOH 122 has raised uncertainty regarding
the legality of faxed missives.
Missives are the series of formal letters that form the contract
in connection with interests in heritable property (real estate) in
Scotland. Temporary Judge M G Thomson, QC held that faxing letters
of offer and acceptance did not constitute binding missives. This
means that the original, signed, document must be delivered to the
other party for missives to be concluded.
In Scotland practitioners may be forced to revert to old,
perhaps inconvenient, practices of sending someone to deliver the
original document to the other agent. This would, of course,
increase the time it takes to conclude the transaction, which is
less than desirable given not only general practice, but also
commercial demand and pressures of time. It may provide more
opportunity for parties to withdraw, thus delaying the certainty
and exposing the transaction to disputes.
Following the Thomas Park case, if missives are to be
concluded by fax in Scotland, it is suggested that a "hold to
order" agreement is made by the parties stating that once the
documents have been faxed or emailed, each party's solicitor
will hold their client's signed (wet ink) copy of the document
"to the order" of the other party. If such a clause does
not exist, then there may not be a binding contract until physical
delivery and receipt.
In England, a consensus appears to be growing following
counsel's opinion. This allows, in the case of deeds, for the
parties to agree from the outset and accept an electronic scanned
copy of the (signed) document. This is thus an electronic original,
ready for delivery in accordance with the instructions (which
should be agreed in advance) of the co-ordinating lawyer. Remember,
though, that counterparts would not be effective under Scots law
as, for the document to be binding in Scotland, all parties must
sign the one original deed (and, for real estate, all schedules
thereto).
The Scottish judgments will force parties to assess in advance
how and when they (and the law) will recognise a concluded contract
when dealing with an interest in land.
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