The outbreak of COVID-19, and the subsequent “lockdown” announced by the government means that those who are looking to enter into agreements are having to consider the ways they can achieve that, given that almost everyone is now working remotely.  Here we consider some the issues and options available.

The recent decision in Bioconstruct GmbH v Winspear [2020] EWHC 7 (QB) has highlighted that the execution of legal documents is not just legal dogma that can be overlooked. There are processes and principles that, without compliance, can result in the legal document being deemed invalid and unenforceable.

Formalities for Virtual Execution

The formalities required to execute documents vary depending on the type of document and the legal personality of the executing party. In certain circumstances, there will be specific statutes, which set out particular formalities for the execution of a document. For example, a contract for the sale of land which must be in writing, incorporate all the terms agreed by the parties and be signed for or on behalf of each party (section 2 Law of Property (Miscellaneous Provisions) Act 1989).

For simple contracts, these are relaxed, and a contract does not need to be signed or even in writing for it to be legally binding. However, in some instances there are statutory provisions, which govern the execution of legal documents (excluding deeds).

For deeds, the formalities are more rigorous, and are as follows:

• A deed must be in writing;
• It must be clear that the instruments was intended to take effect as a deed;
• Must be validly executed as a deed; and
• The deed must be delivered.

As mentioned above, the formalities for executing a deed vary depending on the legal personality of the executing party and are contained within the following statutory regimes respectively:

• Individuals – section 1(3), LP(MP)A 1989;
  • An instrument is validly executed as a deed by an individual if, and only if—
    • it is signed—
      • by him in the presence of a witness who attests the signature; or
      • at his direction and in his presence and the presence of two witnesses who each attest the signature; and

• Companies incorporated in the UK – section 46 (1)(a) requires deeds be executed by the company itself and not on its behalf. As such, section 44 CA 2006 states a company can execute a deed;
  • By affixing its common seal (section 44(1)(a)).
  • By the signature on behalf of the company of either:
    • two authorised signatories (section 44(2)(a)); or
    • a director of the company in the presence of a witness who attests the director’s signature (section 44(2)(b)).

• LLP – regulation 4, Limited Liability Partnerships (Application of Companies Act 2006) Regulation 2009 (SI2009/1804) amends the wording the, but the same principles apply to LLP as to companies. LLPs can execute a deed;

• • By affixing the LLP’s common seal (if it has one).
  • By signature on behalf of the LLP by either:
    • two members of the LLP; or
    • a single member of the LLP in the presence of a witness who attests the member’s signature.

• Charitable incorporated organisations – regulation 19 – 25, Charitable Incorporated Organisations (General) Regulations 2012 (SI 2012/3012).
  • by affixing its common seal or
  • by having the document signed by at least two of its charity trustees or, if it only has one charity trustee, by that trustee. To have effect as if executed under a common seal, the document must be expressed to be executed by the CIO

The correct execution clauses should also be used in conjunction with the entity executing the deed, and the applied method above.

The Law Commission’s Report identified common formalities of execution these were, executed in writing, recorded in a document (the options below ensure this formality is complied with) and the signature to be witnessed.

Process for Virtual Execution

The Law Society has published guidance as to what they consider good practice in their practice note “Execution of Documents by Virtual Means”. This contains three options in relation to virtual execution, ensuring the formalities are complied with. We will briefly explore what these are and the type documents they can be used for.

Option 1 – PDF/Word (used for deeds, real estate contracts, guarantees and simple contracts)

1. Parties agree that the arrangements for signing the agreement will need to be virtual;
2. Finalise the documents and send the engrossed documents to all parties as a PDF or Word attachment, or to their solicitors as agreed. A separate attachment in the email could be a PDF/Word of solely the signature page;
3. Each party prints and signs the signature page, in the presence of a witness if appropriate;
4. Each party then emails their signed signature page to either their solicitor or the coordinating solicitor (depending on what has been agreed) ensuring that they also attach the final document to which the signature page relates. In the Mercury case, having both the signed signature page and the final document attached to an email, would constitute the same physical document;
5. Completion is then agreed at the appropriate moment;
6. Finally, and shortly after completion, the final executed and dated document should be circulated to all parties.

It should be noted, in the case of deeds, a delivery date should be given. Delivery fixes a date where the deed will become binding to the executing parties. It is good practice to make it clear within the deed the delivery date. This can be done by stating within the deed that the document is delivered when dated, usually displayed at the head of the document, or require the parties at completion to notify the others (orally or by email) that they intend to deliver and be bound by the deeds executed.

Option 2 – Signature Page and Authorisation (used for guarantees and simple contracts)

All steps detailed above remain the same as option 1, other than step 4. Instead, the signed signature page is sent to the solicitors or coordinating solicitors alone, together with the signing party’s authority for them to attach it to the final document.

Option 3 – Collect pre-signed signature pages before engrossment of document (used for guarantees and simple contracts)

1. Parties agree that the arrangements for completing the agreement will need to be virtual;
2. In sufficient time before the engrossment of the document, circulate either the hard copy or a soft copy of the signature page of the document being negotiated to all parties. It is good practice that the signature page identifies the document to which it relates;
3. The parties then sign the signature page, and either email it back to their solicitors or the coordinating solicitors (whatever is agreed), held to their order;
4. Once the document has been engrossed, it is sent to each party, and each solicitor obtains confirmation from their client that the final version has been agreed, and authority to attach the pre-signed signature page to the document, and to date and release the document.

Click here for how the formality of a signature can be complied with in the current circumstances, and for how witnessing can be complied with, please click here.

For an overview of how we will still be able to complete your transaction during these unprecedented times, please click here or contact our commercial team by emailing online.enquiries@la-law.com or call 01202 786183.