Signed, sealed, delivered: execution of deeds and documents and how it might go wrong

Written on 29 Sep 2016

After a series of long and complex negotiations, the document is finally agreed. Each party breathes a sigh of relief. But now the document must be validly executed – and this is where all the hard work in reaching agreement can be undone.

Below we answer ten questions that are commonly raised in relation to the execution of deeds and documents.

1. Can a contract be executed electronically?

Yes! English law lays down few formalities for the form of a contract and almost all simple contracts, even those which statute requires are “in writing” or
“signed”, can be executed electronically. However, one point to bear in mind is whether the document will need to be filed with any authority or registry which may insist on a wet ink signature.

2. Can a deed be executed electronically?

Yes! The Law Society’s practice note on the execution of a document using an electronic signature, which was published on 21 July 2016 and which represents the Law Society’s view of good practice in this area, has clarified that a deed can be executed electronically. At common law, a deed must be in writing, but there are a number of cases which have confirmed that an electronic representation of a document (for example, an exchange of emails) can satisfy this “in writing” requirement.

Commonly, deeds are executed on behalf of a company by a director of that company in the presence of a witness who attests the signature of the director. The Law Society’s practice note states that if that witness “genuinely observes” the director signing the deed using an electronic signature, and the witness then goes on to sign the adjacent attestation clause, the deed will have been validly executed. It is best practice for the witness to be physically present when the signatory signs the deed.

3. What has to be done to ensure that a deed is “delivered”?

One of the distinguishing factors about the execution of a deed as compared to a contract is that a deed must be “delivered”. Delivery fixes the date from which the executing party is bound by the deed, and once delivered, a deed is irrevocable in the absence of an express right of revocation. At common law, a deed is delivered when a party expresses an intention to be bound by the deed, even if it retains possession of the document.

The best way to deal with delivery of a deed is to have clear wording in the document setting out that the deed will be delivered on the date appearing at the head of the document. Where a deed is executed by a company, legislation provides that it is presumed to be delivered on execution, unless a contrary intention is proved. There is no such presumption for execution by an individual. Clear wording in the document confirming the position on delivery will avoid confusion and unintended consequences.

4. What date should be inserted into the deed?

Where a deed contains wording stating that it is executed and delivered on the date appearing at the head of the document, as recommended above, then a date should be inserted that is on or after the date that the last signatory signed. However, if the deed does not contain such wording, case law has held that the absence of a date will not affect its validity, which usually takes effect from delivery.

A deed may in certain circumstances be drafted for its provisions to take effect from a date before the date of its execution. If so, care is required. For example, in pensions, many deeds purporting to make, or to “confirm” amendments to a pension scheme made from a date prior to the date of execution and delivery of the deed have been found to be ineffective, due to statutory and case law restrictions on the power to amend a pension scheme retrospectively.

No deed or contract must ever be back dated (i.e. given a date that is earlier than the date it was executed). This is potentially fraudulent.

5. Who can be a witness to the signatory of a deed?

There is no statutory provision requiring a witness in these circumstances to be independent. However the purpose of having a witness is so that they can provide unbiased evidence of what was signed and by whom, if required in the future. Therefore a witness should be independent and it is best practice to interpret this widely.

A witness should not be the signatory’s spouse or partner or a family member, and should not have a personal interest in the provisions of the document. Case law has confirmed that a party to the document cannot act as a witness to another party’s signature. It is advisable that a witness is aged eighteen or over.

6. Do all parties have to sign the same document?

No. If the parties to an agreement do not intend to sign the same physical document, it is best practice to include a counterparts clause in the agreement which in effect creates more than one original document. However, omitting such a clause will not invalidate a document which is in fact signed in counterpart.

7. Do all parties have to use the same method of
execution?

No. The parties to an agreement could validly execute a document using different methods; for example, one party signing electronically and a second using a wet ink signature. A composite version could then be created, either by using a print-out of the electronically signed page together with the wet ink signed
pages, or by scanning the wet ink pages to add to the electronically signed page. If that document was later required to be produced in evidence, an English court would accept the composite version.

8. Can a company use pre-signed signature pages in the execution of a simple contract?

Yes. In February 2010, the Law Society published a practice note on the execution of documents by virtual means, which represents its view of good practice. When executing a simple contract between two parties which are not physically present at the same meeting, it is acceptable to use pre-signed signature pages. When doing this, the signature page should clearly identify the document to which it relates. When the document is finalised, those organising the signing should email the final version of the document to each absent party (or their lawyers) and obtain confirmation from that party (or their lawyers) that they have agreed the final version, and that they authorise the pre-signed signature page to be attached to the final version and for the document to be dated and released.

9. Can one individual execute a document as both a director and the company secretary?

No. The Companies Act 2006 states that a provision requiring something to be done by a director and the company secretary is not satisfied by it being done by the same person acting both as director and secretary. The document could instead, though, be signed by the director in the presence of a witness.

10. What are the possible consequences of executing a document incorrectly?

The recent pensions case, Briggs v Gleeds, illustrates that the consequences can be severe. Gleeds was a partnership that operated a final salary pension scheme. Over a period of more than fifteen years from 1991, a number of deeds of amendment were executed making significant changes to the pension scheme, including closing the scheme to the future accrual of benefits.

It was later discovered that the partners’ signatures on these deeds had not been validly witnessed, as required under the Law of Property (Miscellaneous Provisions) Act 1989. The additional liability for Gleeds to fund the scheme, owing to the deeds having been invalidly executed, was in the region of £45 million.

The High Court held that the deeds were not valid and had no effect. Arguments that the trustees and scheme members should be “estopped” from denying the validity of the deeds did not succeed. The case is, however, due to be appealed to the Court of Appeal on a number of points.

Failure to execute contracts properly is less commonly a problem than deeds. This is because fewer formalities must be complied with when executing a simple contract. Nevertheless, it is essential that both types of document are executed properly to ensure their validity and operation as intended. Whilst the Gleeds case is indicative of the current trend that the courts take a strict approach to observing formalities within the pensions context, the principles have wider application.