The doctrine of counterparts in English law has a couple of meanings, which I will explain. The first relates to deeds. In our interpretation, counterparts are deeds executed as duplicates or identical documents. When a deed is executed in duplicate, there might be separate parts, but all of them are regarded as one deed. Each part is equally effective. I am talking about written documents as opposed to virtual electronically signed documents, which I will talk about shortly.
The concept of the original deed and the duplicate counterpart constituting one deed, and each part being equally effective, is at the heart of the English law of counterparts in relation to written documents. That is certainly the case in a real estate property context, which is the one with which I am most familiar. The biggest example of that would be something like a lease, where the two parts of the lease—the part executed by the landlord and the part executed by the tenant—are identical. The part that the landlord executes is called the original or the principal deed, and the part executed by the tenant and any guarantor is called the counterpart. The counterpart does not have to be signed by all the parties to be valid. It has to be signed by only the tenant and any guarantor to the tenant. The landlord signs a separate part, or the original.
The original deed is usually the part executed by the party doing the disposition. I guess that it would be similar in the corporate context. The party who is selling or letting the property—the one who is carrying out what we call in legal terms the disposition—will always execute the original document. That is the document that is sent to and registered at the Land Registry.
The Land Registry does not need to see the counterpart, which is in effect evidence that the tenant executed the document. The landlord could use that counterpart if it wanted to sue the tenant. Indeed, the landlord would need to have that document in order to go to court and bring proceedings.
The counterpart has a role but, ultimately, the original prevails over the counterpart if they are not identical. Clearly, they should be identical but, for example, sometimes the word processing systems do not work properly and they are slightly different. In that scenario, the part executed by the landlord would prevail as the original over the counterpart. However, if, for example, you had the unlikely scenario in which the original was unavailable, the counterpart would still have a role to play in the situation, because it could be used as evidence that the document existed.
The committee asked what the advantage is of having an original and a counterpart. I will speak later about the separate concept of counterparts generally in commercial agreements, which has similar advantages.
The key benefit of having the original and the counterpart separately executed by the parties is fairly obvious: if the parties execute separate identical parts, the speed of execution is much quicker, which must improve the efficiency of the transaction. If you have to get all the parties—the landlord, the tenant and a guarantor—to execute both parts of the document, that would slow up the transaction, particularly if the parties were based overseas. In that case, it might be much more difficult and time consuming to get the documents executed, especially if you were executing with a wet ink signature, as we call it. In a real estate context relating to deeds, having an original and a counterpart is a much more effective way of executing documents.
It must be said that people sometimes like all the parties to execute each part, just to make them feel more comfortable, but in a property context that does not usually happen.
That is the position in relation to property. I will broaden out to the concept of counterparts that is more applicable to virtual signing and to the bill: commercial agreements.
In commercial agreements there are often counterpart provisions: a clause in the document relating to counterparts. It is similar to what I have just been talking about, but slightly different, as you will see. We do not have a concept of an original and a counterpart in that context; rather, we have the concept of counterparts that are identical parts of the document. They are exactly the same, but each one is signed by a different party; you do not have all the parties signing one document.
Signed, separate counterparts have the same effect as if all the signatures on the counterparts had been on one document, so although the parties are physically signing separate documents, legally, you treat them together as one document. Each counterpart is an original, which can be taken to court and sued upon. All the counterparts together, similar to an original and a counterpart, constitute one document.
That is particularly relevant to the concept of virtual signings as dealt with in the Law Society practice note and also in relation to your bill. It highlights the efficiency of each party being able to do their own electronic and virtual signing. Ultimately, once that has been done, all the counterparts together constitute one document. Each party being able to sign by themselves, without everyone having to sign one document, provides much greater flexibility, which can be utilised in an electronic virtual signing context.
Those are the benefits. Does anyone have any questions on what I have said so far? My next comments relate to question 2.