Virtual signatures and Mercury

If you’re hoping for a futuristic discussion of possible contract law issues on the closest planet to the Sun you’re going to be sorely disappointed1. This article is an aide-memoire for the Mercury Rules2 on virtual3 signatures.

The Mercury Rules apply where parties want to conclude an agreement relying on circulation of signed signature pages. The rules are not required where the parties each sign and return a full copy of the original agreement where, even in the absence of a ‘counterparts clause’?, English common law provides that they will still have entered into a legally binding agreement?.

If you've received a scanned signature page then, unless it was circulated in accordance with the below, it won't be valid...

Virtual signing of contracts?

To be valid, the parties must have followed one of the two methods below to rely on virtual signing:

• Final version of the agreement is circulated.
• Parties each print the signature page, sign and scan.
• Scanned signature page is sent back to the lawyer who circulated the final version together with the written consent of the party to the attachment of the signature page to the final version of the agreement.

Note - the lack of written consent is the most frequently occurring issue when working on commercial contracts and is fortunately the easiest to remedy. A simple email back to the sender with both their scan of the signature page and the full agreement attached along with a request for consent to attach the signature page will suffice (presuming you get the return consent).

Or (this second option is not valid for real estate agreements)

• Signature page is circulated while the agreement is still in negotiation.
• The parties each print the signature page, sign and scan.
• Scanned signature page is sent back to the lawyer who circulated it, expressly to be held to the order of the relevant party until the final version is circulated.
• Once the agreement is in finalised, it is circulated to the parties, who each in writing confirm that their signature page may be attached to the final version.

Virtual signing of deeds?

• Final version of the agreement is circulated.
• Parties each print the signature page, sign and scan.
• Scanned signature page is sent back to the lawyer who circulated the final version together with the written consent of the party to the attachment of the signature page to the final version of the agreement, an attached copy of the final version and confirmation of when or if the deed is deemed to have been delivered.

After following any of the options above, it is recommended that a conformed copy of the agreement is circulated for completeness. If you’ve not followed the above and only received a signed signature page, you’ll run the risk that the agreement isn’t binding (unless you can rely on estoppel).

Footnotes

1 And you should probably query why you’d be hoping for such a thing.

2 R (on the application of Mercury Tax Group and another) v HMRC [2008] EWHC 2721 aka the “Mercury Case”. The case concerned tax avoidance and featured as a side issue whether Mercury’s method of holding signature pages during negotiations was valid. The decision of the court has become known as the ‘Mercury Rules’.

3 Please note I am not covering the legitimacy of electronic signatures which are already covered adroitly by the Law Society - https://www.lawsociety.org.uk/support-services/advice/practice-notes/execution-of-a-document-using-an-electronic-signature/. By 'virtual' I mean where the parties are not signing duplicates in the same room but sending scans of signed agreements to each other.

? E.g. “This Agreement may be executed in any number of counterparts, each of which when executed shall constitute a duplicate original, but all the counterparts shall together constitute the one agreement.”

? Whereby you would end up with a single ‘original’ in multiple parts signed by all parties or more than one original contract depending on the circumstances. To avoid a party attempting to “back-out” after only signing their part or to be sure you are in possession of an original copy of the agreement for tax/auditing requirements including a counterparts clause is recommended.

? Note - not deeds which are covered below.

? There is nothing to prevent contracts from being executed in this way and it is recommended for contracts from a record keeping perspective the signature and full agreement are on the same?email record.

Boring disclaimer - I've written the above in my personal capacity (as a legal nerd) for information purposes only and it is not intended to be legal advice. I make no warranty of any kind and will not be responsible for any actions (or inactions) if anyone is foolish enough to rely on my writing.