Contracting in uncertain times

9th April 2020

In this time of social distancing, it is highly likely that a greater number of legal documents will have to be executed by using electronic signatures. In this article we look at the issues that need to be considered to ensure that documents can still be validly executed remotely.

Legal Background

The precautions being put in place globally to address the spread of Coronavirus include recommending or requiring many people to work from home. This has raised the question of how to execute documents in these circumstances and whether it is possible to legally execute documents by electronic signature. Note that this article will not consider electronic execution in relation to registered dispositions under the Land Registration Act 2002, or any general issues surrounding electronic conveyancing and registration.

The law surrounding electronic signatures is continuing to develop to reflect the rapid evolution in the various electronic forms of communication available. The key legal sources are the Electronic Identification and Trust Services Regulation (EU/910/2014) (eIDAS), the Electronic Communications Act 2000 (ECA 2000), various sources of case law and a report publish by the Law Commission in September 2019.

The Law Commission report (see Walker Morris article published on 26 September 2019) in particular detailed the review into the current laws on electronic signing of documents and made various recommendations on the practicalities of doing so. On 3 March 2020, the Lord Chancellor made a ministerial statement confirming that the government agrees with the conclusions of the Law Commission report and accepted that the government should create an industry working group to further consider the practical and technical issues of electronic execution of documents.

Electronic Signatures

So what actually constitutes an electronic signature? Taking one step back, case law provides that a signature can be made through a variety of methods including (but not limited to):

• a party signing with their name in some form (be that surname, first name, initials or a combination);
• signing with an “X” or other mark; and
• a stamp of a handwritten signature.

The key as to whether a mark on a document will count as a signature is whether this was made with the intention of signing and authorising the document and the intention to become bound by the terms of said document.

The eIDAS and ECA 2000 widely define electronic signatures to be anything in electronic form which is attached to, or logically associated with, the electronic data/document and has been used by the party to sign. Again this can be in a wide variety of forms including, but not limited to:

• typing the signatories name;
• a scanned copy of a manuscript signature;
• a signature made digitally by use of electronic pen (e.g. stylus and touch pad); and
• clicking an icon or button on a website to confirm an order or acceptance to terms.

Again to be effective the key point is that an electronic signature must have an intention to authenticate the document and become bound by the terms the signatory has signed up to. Additionally any formalities that would normally be required for the signature to be valid (e.g. the document being signed in the presence of a witness) must still be met.

Deeds

A number of transactions require the execution of a deed in order to be effective, and strict formalities must be observed for the deed to be valid. In particular:

• a deed must be in writing;
• it must be clear from the face of the instrument that it is intended to take effect as a deed;
• the document must be validly executed as a deed; and
• the deed must be delivered.

It is common practice for deeds to be delivered in virtual form, with each party separately signing the final deed with wet ink and then scanning this to circulate between the various parties on completion. The requirement for deeds to be in writing can also be achieved in electronic form as courts are often willing to interpret “in writing” to include electronic communications.

As discussed above a signature can come in a wide variety of forms, but for a deed there is also the additional requirement of a witness. The Law Commission’s view is that so long as the witness is present in the same location, and can witness the signatory applying their signature electronically then it would be valid, and the witness can countersign electronically as well by the same means.

Witnessing documents remotely (e.g. via video conference) is not something that has ever been tested in law and therefore it remains likely that a witness and signatory must physically be present in the same location for the electronic execution to be valid. This obviously may present some issues in the short term due to the restrictions on movement presented by the COVID-19 outbreak. Workarounds, such as members of the same household witnessing a document, could be utilised so long as the witness is over the age of 18.

Summary

The law generally takes a pragmatic approach to signatures and does not prescribe any particular form that they must take. The key to a signature being valid is the intention of the person applying the signature is to authenticate the document and be bound by the terms they are signing.

Even for documents such as deeds that may have additional signing requirements; so long as the additional statutory, or contractual, requirements have been met any form of electronic signature could be applied to the document.