Formalities in English law are required in some kinds of transaction by English contract law and trusts law. In a limited number of cases, an agreements and trusts will be unenforceable unless it meets a certain form prescribed by statute. While contracts and trusts can be generally formed without formality, some transactions are thought to require form either because it makes a person think carefully before they bind themselves to an agreement, or merely that it serves as clear evidence.[1]
History
The history of requirements of formality in English law generally shows a gradual shift towards fewer and fewer instances of transaction needing form, as technology and recording of agreements has become more advanced. Originally a contract which was sealed ("made under seal", using a wax seal) was treated differently from other written contracts (which were "made under hand"). It was predominantly a mark of authentication. A document that was "signed, sealed and delivered" was taken as secure. Originally, only a wax seal was accepted as a seal by the courts, but by the 19th century many jurisdictions had relaxed the definition to include an impression in the paper on which the instrument was printed, an embossed paper wafer affixed to an instrument, a scroll made with a pen, or the printed words "Seal" or "L.S." (standing for the Latin term locus sigilli meaning "place of the seal"). If a seal was in place, common law courts regarded it as removing the need for consideration to support the contract. It raised, at least, a rebuttable presumption of consideration.
By the 20th century a small circle of red adhesive paper affixed to the document in question was sufficient when an individual had to use a seal. This process was described in a report of the Law Commission, Transfer of Land: Formalities for Deeds and Escrows[2] as "a meaningless exercise". The was most common on a contract for the sale of land, although the courts also held that a circle containing the letters "L.S." was adequate.[3]
The common law rule which required that a deed made by a private individual had to be sealed to be validly executed was finally abolished in 1989 by the Law of Property (Miscellaneous Provisions) Act 1989. The Act implemented recommendations made by the Law Commission of England and Wales in their 1987 report Deeds and Escrows[4] and replaced seals with the requirements that the document had to explicitly state that it was being executed as a deed, and had to be witnessed.[5]
Contracts
In contract law, formality is typically required for large engagements. This includes the sale of land,[6] a lease of property over three years,[7] a consumer credit agreement,[8] and a bill of exchange.[9] A contract for guarantee must also, at some stage, be evidenced in writing.[10] As a matter of contract English law takes the approach that a gratuitous promise, as a matter of contract law, is not legally binding. While a gift that is delivered will transfer property irrevocably, and while someone may always bind themselves to a promise without anything in return to deliver a thing in future if they sign a deed that is witnessed,[11] a simple promise to do something in future can be revoked. This is result is reached, with some complexity, through the English doctrine of consideration.
A contract of employment requires no form to be effective, however an employee has a right under the Employment Rights Act 1996 section 1 to receive written particulars stating the contract from the employer. This may not in fact be the contract, which a court can construe from all the circumstances, but will be strong evidence of it.
Trusts
Trusts can generally be made without formality, however three main, large and practically relevant exceptions exist. First, a trust of land requires a signature on a written document evidencing a declaration, under the Law of Property Act 1925 section 53(1)(b). This means, someone can first declare a trust of land without any writing or signature, so long as in the case of a dispute the declaration is evidenced in writing. Second, any "disposition" of and existing equitable interests also requires a signature under LPA 1925 section 53(1)(c). Such a declaration actually requires form at the time. Third, under the Wills Act 1837 section 9 requires that the testator signs a written document and this is witnessed by two people.
Unternehmen
With regard to companies and other corporate bodies, the common law originally required that all contracts made by such a body had to be made under seal, whether they were deeds or not. This rule was gradually eroded away, for example being abolished in respect of companies by the Companies Acts in the first half of the twentieth century. For companies registered under the Companies Acts the relevant provision is now section 43 of the Companies Act 2006.[12] But until 1960 this remained in force for other corporations.[13] It was abolished by the Corporate Bodies' Contracts Act 1960.[14] Normal contracts (i.e. not deeds) can now be made by a corporation in the same way as they can be made by an individual. The Companies Act 1989 removed the requirement for a company to have a common seal at all, and made provision for those documents which had previously needed to be executed under seal, such as deeds, to instead be executed by officers of the company.[15] However companies can still have and continue to use seals to execute deeds if they wish, in which case the seal has to be engraved (i.e., a seal which leaves an impression on the page, not printed or a wafer facsimile) and to bear the name of the company.[16]
Some other corporations (which are not companies registered under the Companies Acts) are still required to have and use seals. For example, the Royal Charter incorporating the Royal College of Nursing requires the College to have a common seal,[17] as does that of the BBC.[18] Also, the changes relating to deeds which were introduced in 1989 do not apply to corporations sole such as Government Ministers or bishops of the Church of England. Therefore, where a corporation sole has to execute a deed, it continues to have to do so by the use of an official seal.[19]
See also
Notes
- ^ See L Fuller, ‘Consideration and Form’ (1941) 41 Columbia Law Review 799
- ^ (1985) Working Paper No 93, para 4.2
- ^ First National Securities Ltd v Jones [1978] Ch 109
- ^ Law Com No 163
- ^ Section 1 of Law of Property (Miscellaneous Provisions) Act 1989
- ^ Law of Property (Miscellaneous Provisions) Act 1989 s 2(1)
- ^ Law of Property Act 1925 ss 52 and 54(2) require that such leases are made by deed.
- ^ Consumer Credit Act 1974 ss 60 and 61
- ^ Bills of Exchange Act 1882 s 3(1)
- ^ See Statute of Frauds 1677 s 4 and Actionstrength Ltd v International Glass Engineering In.Gl.EN.SpA [2003] UKHL 17, holding that while this requirement may be undesirable, it could not be circumvented through estoppel.
- ^ Law of Property (Miscellaneous Provisions) Act 1989 s 1
- ^ See Template:UK-SLD
- ^ eg Wright & Son Ltd v Romford Borough Council [1957] 1 QB 431
- ^ Corporate Bodies' Contracts Act 1960 as originally enacted (Office of Public Sector Information). See also Template:UK-SLD
- ^ CA 1985 s 36A, as inserted by the Companies Act 1989, see Companies Act 1989. This provision has now been replaced by CA 2006 ss 44-45
- ^ CA 1985 s 350 (see text of the 1985 Act as originally enacted, now CA 2006 s 45
- ^ Royal College of Nursing Royal Charter, paragraph 14
- ^ BBC Royal Charter, paragraph 47(2)
- ^ See Contracts - Under Hand or by Deed?, Property Advisers to the Civil Estate Central Advice Unit Information Note 19/99, August 1999, Office of Government Commerce. Also The Execution of Deeds and Documents by or on behalf of Bodies Corporate, Law Commission Report No 253 (1998), paragraphs 4.23 to 4.28.
References
- Artikel
- L Fuller, ‘Consideration and Form’ (1941) 41 Columbia Law Review 799
- Reports
- Law Commission, Transfer of Land: Formalities for Deeds and Escrows (1985) Working Paper No 93