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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