Until recently, in Scotland, if you had a document that needed to be executed by more than one party, e.g. a lease, a facility letter, a share purchase agreement, etc, then that single document had to be signed by all of the parties before it could be considered to be an executed contract or binding obligation.
This is fine if all parties are local and available to attend a meeting where everyone can sign at the same time. But if one or more parties are geographically remote, this meant that the (one and only) principal document had to be circulated around the houses (and occasionally across the globe) to be signed in turn by each party and returned. While solicitors could often put in place ancillary contracts to bind their clients to the terms of the principal document until it had been signed by all parties, the situation was far from ideal.
Fortunately, as of 1 July this year, the introduction of the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 means that Scottish documents can now be executed in "counterpart" - which has been a valid method of execution in England and Wales for many years. Counterpart execution means that each party to the document can sign an identical copy or copies (known as a "counterpart") of that document. The copies can then either be collated by one "nominated person" or each party can sign as many documents as there are parties - and then keep one copy and deliver the other signed copies to the other parties. Either way, a validly signed document is created, even though the parties haven't all signed a single version of the document - instead they have each signed separate copies of the same document.
How does signing in counterpart work in Scotland?
There are three options for this method of execution in Scotland - two of them use a "nominated person" and the other does not.
In the first option, each of the parties to the document signs a copy of the document and passes it to a "nominated person" (this is likely to be one of the solicitors involved in the transaction but it could also be one of the parties). Once the nominated person has a full set of signed counterparts, the document is deemed to be fully signed. The nominated person would then usually hold the counterparts for the benefit of all parties.
For the second and third options, each party will sign as many copies of the document as there are parties to the document. So, if you're dealing with a lease, each party (landlord and tenant) would sign two copies. For the second option, all copies would be sent to the nominated person who can check the signing, collate the documents and provide a complete set to each party. For the third option, each party retains one copy that it has executed and "swaps" the other counterpart (or counterparts) with all other parties. For both the second and third options, each party will end up holding as many documents as there are parties, with each one having been signed by one of the parties.
When do counterparts become effective - holding as "undelivered"
It is not until each counterpart has been "delivered" to the nominated individual (or the other parties as the case may be) that the document becomes effective and binding. Sometimes the parties may wish to delay or postpone when a document becomes effective. It is open to the parties to agree that the counterparts will held as "undelivered" until a certain event occurs or it is confirmed that they can be held as delivered.
Passing documents to the other side of a transaction to be held as "undelivered" in advance of a deal completing is already common practice in Scotland and it's no great surprise that these rules apply to counterparts as well.
Electronic delivery of documents
Another significant change made by the 2015 Act are the provisions relating to the electronic delivery of documents. Prior to July this year, signed legal documents arguably could not be treated as "delivered" if they were sent by e-mail. Instead, it was thought that the physical signed document had to be sent to the recipient.
This has always been something of a headache, as most solicitors conclude missives these days by attaching a signed copy of the Offer to an e-mail, followed by receipt of an e-mail from the other side with a scanned copy of the formal acceptance letter. There has always been some doubt about whether this was effective or whether you had to wait for the physical offer and acceptance letters to arrive in the post.
This has led to a convoluted practice in Scotland in recent years of solicitors confirming to each other that, even though they are still holding the physical missive letter in their hands (as they haven't stuck it in the post yet), they are holding it "on trust" for the other party. The solicitors also usually confirm that they'll put the missive letter in the post that day and won't remove it from the post.
The 2015 Act now brings the law in line with practice and allows for documents to be delivered by fax or by being attached to an e-mail - whether this is a document signed in counterpart or not.
It always has to be kept in mind that the delivered electronic document is not to be treated as the original. If the document will require to be registered in a public register, or the original document might be needed by the recipient for some other reason, then it will be important to ensure that the original hard copy signed document is delivered - soon after its electronic version.
