2015 saw a major, welcome change in the law concerning execution when Scotland introduced counterpart execution. Before 1 July 2015 (the date that the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 (“2015 Act”) came into effect) the legal requirements relating to execution can be considered “backwards” when compared to England and Wales which benefited from counterpart execution.
Pre 1 July 2015, the prevailing view under Scots law was that counterpart execution was not competent. When it came to completing transactions, the options were either: (i) have a meeting with all parties physically in attendance; or (ii) circulate a single copy of the agreement to all parties for signing. Obviously with transactions involving multiple parties and in different locations, this proved cumbersome and sometimes led to the parties choosing English law as the governing law and thereby benefitting from counterpart execution.
The Legal Provisions under the 2015 Act
The 2015 Act introduced counterpart execution in Scotland on a statutory basis. A document executed in counterpart is one which is signed in two or more duplicate, interchangeable parts which, once signed, constitute one single document. The 2015 Act states that the “single document” may consist of either: (i) all counterparts in their entirety taken together; or (ii) one whole counterpart together with the signature pages of all other counterparts.
The 2015 Act also states that a document executed in two or more counterparts will become effective once all counterparts have been delivered, and any other step required by law for the document to become effective has been taken.
Given that documents signed under Scots law will contain signing blocks with the date of each party’s signature, thought should be given to the possibility that one or more counterparts may be signed on one date but delivered on another. For example, often the “completion date” is narrated as being the date of the agreement – if the dates of signing and/or delivery of each counterpart are different, the parties should reflect this and make it clear when the completion date is to be in the agreement.
Parties also have two options for delivering their signed counterparts. The first is to deliver theirs to the other party/parties who did not subscribe their counterpart. The second involves nominating (under section 2(1) of the 2015 Act) one person to take delivery of all counterparts. A person nominated will have an obligation under the 2015 Act to “hold and preserve” all counterparts for the benefit of the parties, however, this obligation can be contracted out of in the agreement if required.
The 2015 Act has also clarified the law relating to electronic delivery of traditional paper documents. Such documents may now be competently delivered as an attachment to an e-mail, by fax, by memory stick, portable media or any other means in a form which “requires the use of electronic apparatus by the recipient to render the thing delivered intelligible”. Documents can be delivered this way by either: (i) sending a whole copy; or (ii) sending only a part of that copy (provided that it is sufficient to show that it is part of the whole document and includes the signature page of the party delivering the document).
So is Scots law now the same as England when it comes to counterpart execution?
While Scots law does adopt counterpart execution and shares some characteristics, it is not the same as English law. For a start, counterpart execution in Scotland is based on statue and counterpart execution in England is based in custom and practice. There are also some substantive differences which we have highlighted in our Top Tips below.
Counterpart Execution Top Tips
A degree of thought needs to be given to several issues when using counterpart execution in Scotland:
1. Consider if a counterparts clause should be inserted in the agreement.
Under the 2015 Act, a counterparts clause in the agreement is not required. However, it is best practice to include one but it must reflect the signing practicalities – inserting a pro forma counterparts clause without all parties considering it in detail can cause more harm than good!
2. Signing practicalities should always be agreed well in advance of completion (irrespective of whether or not there is a counterparts clause).
For instance, will the agreement be signed in counterparts? If so, will delivery of each counterpart be to all other parties, or will a nominated person be used? Will the parties contract out of the nominated person’s obligations? Will delivery by electronic means be used?
3. Consider when “completion” should take place.
If it’s once the agreement becomes effective (i.e. all counterparts are delivered) then the date of completion may be different from the date that each party signs the agreement. Thought should be given as to how to reflect this in the agreement
4. Print off the whole document for signing
The 2015 Act makes it clear that the whole document must be printed and signed by a party to be a valid counterpart (albeit a part of the document may be sufficient for the purposes of delivery). In England, custom and practice following the Mercury case allows for a party to print off and sign only the signature page and then deliver a scan of this page together with a copy of the entire agreement.