Keeping trade moving: Electronic signatures and e-mail footers

21st October 2019

Against a backdrop of political and economic uncertainty, businesses are doing all that they can to keep trade moving. As such, any drivers for speed and efficiency are particularly welcome. Recent findings that electronic signatures and e-mail footers can constitute valid execution of documents are likely to speed up the contracting process, but there are some associated risks. Walker Morris’ litigation and dispute resolution specialist explains and offers practical advice.

Electronic execution and formation of contract

Walker Morris reported in September on the Law Commission’s recent conclusions that electronic signatures are valid; and that the law as it currently stands allows documents, including land contracts and deeds, to be executed with an electronic signature.

Shortly after publication of the Law Commission’s report, the judgment in the case of Neocleous v Rees [1] was also published, in which HHJ Pearce decided that:

• a single ‘document’ can include a chain of e-mails; and
• an automatically-generated e-mail footer constituted a valid signature for the purposes of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

Both the Law Commission and Manchester County Court have confirmed that the test as to whether a document has been ‘signed’ is whether the name (or mark) was applied with authenticating intent.

Authenticating intent was found in the Neocleous case for a number of reasons:

• Language has a tendency to develop and many ordinary people would now understand ‘signature’ to include a named stored in, and automatically applied by, an e-mail system’s signature rule function.
• Creating the signature rule had involved the conscious act of a person.
• The sender of the e-mails was aware that their name was being applied as a footer.
• The recipient had no way of knowing whether the signature was added manually or by an auto-rule.
• Looked at objectively, the presence of the signature indicated an intention on the part of the named sender to associate him- or herself with the e-mail and to authenticate or sign it.
• The presence of the name and contact details was in the conventional style of a signature at the end of a document.
• The addition of the words “Many thanks” immediately before the footer showed an intention on the part of the sender to connect the signature with the contents of the message.

As a related point, Walker Morris has recently published advice on the risks associated with the informal and inadvertent formation of contracts [2].

Taking all of these points together, it is now more important than ever before that parties negotiating arrangements or agreements by e-mail – even including land contracts or other contracts with specific statutory signature requirements – understand the fundamental law of formation of contract, and appreciate that their automated e-mail signature could have a legally binding effect.

What practical considerations arise?

E-mail is currently the predominant means by which business is conducted, and many (if not most) corporates deploy e-mail footer rules so that the sender’s name and contact details – their electronic signature – is automatically applied to every message sent. All businesses should therefore be aware that every such e-mail contains an electronic signature that is capable of being legally binding.

There are still some circumstances however – where the law is more prescriptive as to the formalities or type of execution required – in which an e-mail footer alone would not constitute sufficient execution. (One example would be contracts by deed where the physical presence of a witness is required for attestation; another might be the formalities required for proper execution of a will under the Wills Act 1837.) Whilst the Law Commission’s report and Neocleous case therefore bring clarity to many commercial circumstances, some scope for uncertainty and error nevertheless remains.

Businesses should consider whether their e-mail footers should include a disclaimer of the possibility of the footer amounting to a signature for the purposes of land or other contracts; and/or whether all messages should be designated ‘subject to contract’. What wording might be appropriate, or whether such an approach is practical at all, will depend on the particular practices of different businesses, and so specialist, tailored advice will be required.

As technology advances, and as methods of communicating and of conducting business evolve, so too will the law and practice in relation to the execution of documents. The courts have already indicated that clicking an “I accept” tick box on a website or the header of a SWIFT message can constitute valid electronic signatures, but no doubt developments in AI and increased usage of online portals, social media, apps, auto-replies, chatbots and the like mean that further practical examples and guidance can be expected in due course. Walker Morris will monitor and report on developments.

In the meantime, the best advice will be for businesses to educate their staff:

• as to the law and practice concerning the formation (including the inadvertent formation) of contracts;
• as to the current legal position and any internal policies on the execution of documents; and
• as to the absolute importance of giving due care and consideration to every e-mail and whether the sender intends to authenticate, and be bound by, its contents.

For further information, advice or training on any of the issues covered in this e-mail, please do not hesitate to contact any member of Walker Morris’ Litigation & Dispute Resolution department.

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[1] [2019] EWHC 2462 (Ch) (20 September 2019) (HHJ Pearce)
[2] See Formation of contract and enforcement of terms and Commercial contract formation for more detailed information and advice