452Property Law

pre-electronic system the client signifies to the other party that he intends to be bound by some face-to-face communication, such as delivery or speech, or more sophisticatedly by signing and handing over the document which effects the transaction, which both records the terms agreed and signifies the intention to be bound by them. In an electronic system where the transaction is carried out physically by the party’s agent, other systems of authentication must evolve.

Formalities rules are therefore in a somewhat fluid state at the moment, and consequently it is particularly important that we have a clear idea of why we have formalities rules, and the functions they are intended to perform. Before looking at these questions, however, there are some general points to be made.

12.2.3. Validity and enforceability against third parties

There are two principal ways in which a legal system can ‘punish’ non-compliance with formality requirements. The strictest punishment is invalidity: the transaction (whether the creation or grant of the interest) does not take effect at all unless and until the formalities are completed. The most lenient is non-enforceability against third parties: the transaction is fully effective between those who were parties to it, but does not confer on the transferee/grantee an interest enforceable against the rest of the world. In between these two extremes there are two sub-species. In some cases, in a variation of the invalidity sanction, compliance with the formal requirement is necessary to make the transaction take effect in law, but failure to comply will not of itself prevent the transaction taking effect in equity. So, for example, in registered land the grant or transfer of a registrable property interest will not result in the grantee or transferee acquiring a legal interest unless and until it is completed by registration, but up until registration the grantee/transferee will have the equivalent equitable interest, provided all the other formal requirements for granting or transferring that kind of interest have been complied with. Similarly, a legal mortgage of land must be made by deed (because of section 52 of the Law of Property Act 1925) but if the mortgage is not made by deed it will still take effect as an equitable mortgage, but in this case provided it satisfies the appropriate formalities for equitable mortgages (which, because of the rule in Walsh v. Lonsdale, are those set out in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, as we see in section 12.3 below).

In other cases, now deservedly rare, a variation of the enforceability sanction applies and the effect of failure to comply with the formalities rule is that the transaction is valid but not enforceable at all, not even as between the parties. This used to apply to contracts for the disposition of an interest in land. By section 40 of the Law of Property Act 1925 no formalities were necessary for the formation of a valid contract for the disposition of an interest in land, but such a contract was not enforceable unless evidenced either by writing signed by the person against whom enforcement was sought, or by part performance of the contract by the party seeking to enforce it. This problematic concept of a valid but non-enforceable contract could cause problems. In Morris v. Baron [1918] AC 1, where the contract