Pointing out the significant risks in relying on informal or “unsigned” guarantees given electronically by email.
Most agreements can be made informally (although it can be difficult to prove the existence of such an agreement later). Under English law, some contracts do, however, require written documentation and this is, inter alia, the case for guarantees.
Guarantees must
- Be in writing (or if it is given orally, there must be a “memorandum or note” evidencing the oral agreement)
and - The agreement or memorandum must be signed by the guarantor (or by someone authorised by the guarantor to do so).
The English High Court has recently decided a case where a guarantee given by e-mail was held not to be enforceable.
A company was under threat of being wound up (bankruptcy), and a director communicated with the lawyers acting for a creditor by e-mail. The director (or rather one of his employees) sent an e-mail to the lawyers asking for the winding up petition to be withdrawn against a personal guarantee by the director for a certain sum, a repayment schedule etc.
When payment was not made and the creditor sought to enforce the guarantee, this was held not to be enforceable.
Although the e-mail itself did constitute a note or memorandum, this particular e-mail did not fulfil the requirements of a signature as required under statute. The creditor was relying on the fact that the e-mail did include the e-mail address at the top of the e-mail, but this was automatically inserted and did not constitute a signature. No other form of “signature” was included in the e-mail.
Accordingly, in this rather harsh decision, it was decided that the e-mail address in itself had not been inserted into the document (e-mail) with the intention of “giving authenticity” to the e-mail.
In order for such a guarantee sent by e-mail to be enforceable, there must be some sort of manifestation that the guarantor intends to be bound by the guarantee (i.e. it must be demonstrated that the guarantor had intended by his act of typing his or her name into the e-mail in such a way as to demonstrate an intention to be bound).
This case can make it difficult to rely on guarantees provided by way of e-mail. Many businessmen rely, when sending e-mails, on not only the automatic insertion of an e-mail address but also an automatic insertion of a “signature” (e.g. “regards [name], maybe job title, telephone and fax numbers etc.). It remains unclear whether this other form of “automatic” signing would be sufficient evidence of an intention to be bound and therefore enforceable.
With regard to guarantees, it may therefore still be the safest for any creditor who wishes to rely on a guarantee to insist on having such a document signed in the usual way. The Club would therefore recommend that any negotiation regarding a guarantee at the very least is concluded by faxing a properly signed written guarantee.
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Lloyd’s Law Report [2006] 1. 65