Why does LP(MP)A 1989, s 2 proffer a 2nd form — that allows each of the 2 separate documents signed by merely 1 party? Advantages over 1st form?

Question

I start by citing the Law of Property (Miscellaneous Provisions) Act 1989, s 2(3).

(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.

Oxford University Prof. of English Law, Ben McFarlane, expounds this far more understandably.

4.6 The requirements for a valid contract for the sale or other disposition of an interest in land are provided by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A 1989). Under that section, for a contract for sale of land to be valid it must:

• be in writing;
• incorporate all the terms the parties have expressly agreed (by setting out the terms or by reference to another document) either:
– in a single document signed by both parties; or
– in each of two documents signed by one of the parties and exchanged.¹

Under s 2, the written contract may take one of two forms: a single document signed by both parties; or separate documents each signed by one of the parties and exchanged. The document—or each document, in the case of an exchange—must contain all of the terms expressly agreed by the parties. The terms may be contained in the signed document—or documents, in the case of exchange—or be contained in a separate document that is incorporated by reference.²

I have spoken to my friends and family. Everyone I know has heard of, and dealt with, merely the first form — that I highlighted in gray. Nobody I know ever dealt with the second form — that I bolded and italicized.

1. Why didn't s 2 stick to the 1st form in gray? Why proffer the 2nd form?

2. What are the 2nd form's advantages? What can the 2nd form accomplish that the 1st form cannot?

3. For the 2nd form, why didn't s 2 require everyone to sign both separate documents? This feels safer, more conclusive, steadfast than merely 1 signature on each of the 2 documents.

¹ Land Law Core Text Series (2020 2 edn), p 96.
² Land Law Text Cases Materials (2021 5 edn), p 253.

Answer 1

I have spoken to my friends and family. Everyone I know has heard of, and dealt with, merely the first form — that I highlighted in gray. Nobody I know ever dealt with the second form — that I bolded and italicized.

Your friends and family have misunderstood. From a practical point of view, contracts for almost all property are transacted via the 2nd form. The seller signs the seller's copy of the contract, and the buyer signs the buyer's copy of the contract. Both parties seldom sign the same documentation in England & Wales.

Now I answer your questions 1-3.

1. LPMPA was dreamt up back in the 1980s, when conveyancing needed to be modernised, simplified and standardised. The 2nd form is useful — because as long as both parties have agreed the contents of the contract — the seller's solicitor can get the seller to sign the contract, and the buyer's solicitor can get the buyer to get the contract. Then they are literally exchanged — on exchange of contracts — so that both parties have a record of the other party, agreeing to the terms of the contract and being bound by that contract.

2. The 2nd form is simpler and more efficient. Each party knows what is being signed because it has already been agreed in advance, and they are assured to get a copy of the contract signed by the other party. This means the two parties don't have to meet and sign the same document, or sign multiple copies of the same document. There are things that the seller signs that the buyer does not and things that the buyer signs that the seller does not. It would simply take more time to have everyone sign everything.

3. Because the documents are identical. There would be no practical benefit. Additionally, the solicitors acting for the buyer and seller bind the parties through the exchange process, not the signatures on the contract documentation (though these signatures are required on the contracts).

Answer 2

It is a convenience. In many property transactions, the buyer and seller may be far away from one another, and may lead busy lives. If there is only one copy of the contract, then they have to sign serially. First one party signs, at her convenience, and then the papers are sent to the other party - who may have been waiting for some time. With two copies, they can sign in parallel, each at a time which is suitable for them. They each end up with their own perfectly valid copy of the contract to keep. In particular, they have a copy attesting to what the other party has agreed to, which could be used to hold them to account later.

The binding nature of this procedure is established in Eccles v Bryant & Pollock [1948] Ch 93, [1947] 2 All ER 865, a case which concluded that the exchange of documents forms a contract, and that pre-exchange negotiations between the parties' agents do not. The Master of the Rolls, Lord Wilfrid Greene, described this as a "well-known, common and customary method of dealing".

The reason why these rules appear in the Act of 1989 is that its section 2 replaces the former provisions of the Law of Property Act 1925, section 40, concerning the writing requirements for contracts. That read:

No action may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto by him lawfully authorised.

Careful reading is needed to see that:

1. The signing requirements are not symmetric. A contract that is not signed, or only signed by one party, can still be valid. But if only one party has signed, then only they can be sued, which is unjust and bizarre. (That often happened where an oral agreement was followed by one party committing it to writing.)
2. Section 40 does not say that the agreement has to be complete, although that was actually the requirement at law. People could be misled into thinking they had an enforceable agreement, when they only had evidence of some of its terms.
3. If the agreement is in several parts, the section does not say which of them ought to be signed.

Compare to the 1989 provisions (subsections 1-3 of section 2, omitting the rest):

1. A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
2. The terms may be incorporated in a document either by being set out in it or by reference to some other document.
3. The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.

The new rules say that there should be a document that is signed, and which either includes or incorporates everything that has been agreed. They leave open whether there is to be one copy, or an exchange - because both forms are acceptable on legal and policy grounds, but it was necessary to make that explicit in the new legislation.

The background is described in the Law Commission report, Command Paper 164 of 1987, which recommended this change in the law. They considered a simple repeal of section 40, which would turn disputes over to the discretion of the courts, but decided that making matters explicit would be more helpful. It also avoids difficulty with accidental oral "agreements" and so on during the negotiation stage. The new signature requirement, where all parties must sign, is discussed at paras 4.6-4.8. The Commission also said, "The established practice of exchange of parts should not be inhibited." The statutory wording is clearer in the Act than in the report, but the essentials are the same.