Formalities for a binding contract: a conventional steer?

How many people remember the case of a cheque written on the side of a cow?  The fictitious case of Board of Inland Revenue v Haddock was one of the more famous of A P Herbert‘s Misleading Cases in the Common Law, which first appeared in Punch magazine in (probably) the 1920s.  It concerned the question of whether a cheque written on the side of a cow was a valid payment of an income tax bill.

The case has been cited in real court cases, including Victor Chandler International Ltd v Commissioners of Customs and Excise [1999] EWHC Ch 214 (16th July, 1999) in which Lightman J held that, for the purposes of certain gaming legislation: “neither a person nor A.P. Herbert’s ‘negotiable cow’ …can constitute a document.”

Cheques are, of course, a different type of legal instrument from contracts.  Both types have some features in common – most notably that they consist of promises that the law will enforce.

We are often asked whether the sending of a fax, or emailing a pdf copy, of a signed contract is sufficient for a binding contract to come into existence.  Under English law, the answer to this question is usually yes, if that is what the parties agree to do, subject to some qualifications mentioned below.  In most cases, parties have a very wide discretion as to the form their contract will take.  They could, if they really wanted to, agree that the contract will come into effect once it is written down on the side of a cow and once the tail is signed by each of the parties.  Scanning such a contract into an electronic form to create a pdf copy may present some problems, at least with our office scanner.  Perhaps your local airport could assist.

Most contracts can be oral, but in the case of sophisticated commercial contracts, parties usually wish the terms to be recorded in documentary form.  Where parties choose to make it a written contract, they will usually require that the contract be signed by, or on behalf of, each of the parties.  By convention, contracts are often signed at the end of the document.  The parties are, however, free to choose that the contract will come into effect without formal signatures, or by exchanging faxed signature pages.  If the parties choose to deviate from established custom in how they enter into their contracts, they would be well-advised to record their agreement to do so, so as to provide evidence of their mutual intention.

Nowadays there are other options, including use of digital signatures (the most secure type of electronic signature).  If the parties agree to use digital signatures, then applying those signatures to a draft contract will be effective to bring the contract into effect.  Our instinctive preference is to see a real signature (ie one written in handwriting), or an electronic copy of one (eg sent by fax or email).  Forging such a signature would seem to require more conscious effort than logging into someone else’s computer, using their password and sending a digital or electronic signature.

Certain types of contract have to be in writing.  IP assignments usually have to be in writing.  Certain other types of contract have to be in writing and executed as deeds, eg conveyances of real property.  But these are the exception rather than the rule, under English law.  The requirements under other countries’ laws vary, and in some cases require much more formality, eg notarisation.

So, faxed signatures are usually fine.  And signature on the back end of a cow also works, if that is what the parties moo-tually agreed to do (sorry!).  At least under English law.

Further information on the execution of contracts, including use of electronic and digital signatures, appears in our book, Execution of Documents (2nd edn, Law Society Publishing, 2008).