At my Osgoode Professional Development workshop in Toronto last week, a participant helpfully mentioned a recent English case in which the court held that transferring the signature on an incomplete draft deed or contract to a final version wouldn’t be effective if the changes made were so significant that the final version was arguably a different document.
The following is from an account of this case by the English law firm Collyer Bristow:
R (on the application of Mercury Tax Group and another) v HM Revenue & Customs Commissioners and others [2008] EWHC 2721 (Admin).
The background to this case concerned the application for and grant of search warrants during the course of an HMRC investigation into a potentially fraudulent tax avoidance scheme. The tax consultancy company operating the scheme (the Claimant) applied for judicial review and the Court had to consider whether various documents had been validly executed. The key documents included a Trust Deed, an Option Agreement (in the form of a deed) and a Sale and Purchase Agreement (again in the form of a deed).
One of HMRC’s assertions was that the documents had been fraudulently altered as the taxpayer clients of the Claimant had signed early incomplete drafts of the documents and the signature pages had been later transferred to amended final versions. The Claimant argued that the transfers constituted a lawful amendment, that the clients had implicitly authorised or ratified the changes of detail and this was usual commercial practice.
The Court confirmed that the transfer of signature pages from an incomplete version of a deed to a later, complete and amended version was not effective. The Court also doubted that this procedure could be effective for a contract which was not a deed.
I gather that this case has engendered much discussion (see McDermott Will & Emory’s account), but I’m not inclined to pore over it.
For present purposes, I’ll limit myself to suggesting that this case constitutes a useful reminder that lawyers shouldn’t be cavalier about making changes to a contract once the parties have agreed that it’s in final form. If you fix a mistake or remedy an omission, make sure that at a minimum you have email traffic between the parties and their lawyers confirming your changes. And make sure that everyone gets for their files a fully signed copy of the final-final version of the contract.
And more generally, a contract becomes enforceable once the parties indicate assent to its terms. If someone signing for a contract party signs the signature page that accompanies the first draft, gives it to the lawyer, and has no further involvement, it’s not evident that slapping that signature page to the back of the final version of the contract would constitute meaningful assent by that party. By all means be pragmatic about how you handle signature pages, but make sure you get client sign-off on the final deal terms.
I have often been puzzled why attorneys have been OK with this, and even suggested it to me. If I am going to obtain assent from my client to the changes, why would we want even the tiniest doubt – why not just sign the new document? This page substitution has always troubled me, and I go out of my way to make it clear that it is not acceptable to me, or my client.
I encountered a similar situation involving handwritten changes to an agreement. In my case the agreement was sent to a ((n) unrepresented and out of province) landlord for signing. Based on advice from the landlord’s local property manager the landlord made handwritten changes (and initialled the changes) and returned the agreement. The property manager subsequently contacted us to say the handwritten changes were incorrect and the content as originally provided was fine.
I then faced a situation situation where I either had to insert a new page into the argeement (with the consent of the landlord – but was very reluctant to interfere with the integrity of the agreement) or print off whole new agreement and re-send for signing (and the time it took the landlord to sign the first agreement was measured in months). Neither option was particularly appealing.