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 do 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.

Reference

Thomas Park and Another, Petitioner [2009] CSOH 122