Law Commission report on electronic signatures

26th September 2019

The Law Commission has been considering legal and practical issues associated with the electronic execution of documents, and whether current law is fit for purpose and for modern commercial practice. The Commission’s conclusions were published in a report on 4 September 2019. Walker Morris’ specialist highlights the key points to note.

What perceived problems prompted the Law Commission’s review?

Walker Morris has reported previously on the Law Commission’s recent consultation which sought to address legal uncertainty surrounding the electronic execution of documents which has been causing practical problems in today’s fast-paced, technology-driven business world.

One of the key issues is that, whilst basic contracts can be validly formed without any documentation or formality [1], other contracts and legal documents must comply with certain formalities in order to have legal effect.  In particular, contracts for the sale of land must be in writing, contain all agreed terms and be signed by all parties; and transfers, charges and some leases must be made by deed (which involves signing, witnessing and attesting). Whilst EU legislation [2] and the UK courts accept electronic signatures as valid; and whilst HM Land Registry is, as a matter of policy, moving towards digital conveyancing [3], the relevant UK statute, the Electronic Communications Act 2000, does not expressly allow electronic signatures.  Neither does the law of England and Wales clearly or comprehensively confirm the validity of electronic execution in the context of deeds.

Law Commission conclusions: Electronic signatures are valid…

In line with its provisional view published back in August 2018, the Law Commission has now concluded that electronic signatures are valid; and the law as it currently stands allows documents, including land contracts and deeds, to be executed with an electronic signature. In particular, the Law Commission has confirmed:

• An electronic signature is capable in law of being used to execute a document (including a deed) provided that the person signing the document intends to authenticate the document and that any formalities relating to execution of that document are satisfied.
• Such formalities may be required by legislation, or may be laid down in a contract or other legal instrument under which a document is to be executed. Examples of formalities that might be required include that the signature be witnessed; or that the signature be in a specified form (such as being handwritten).
• An electronic signature is admissible in evidence in legal proceedings. It is admissible, for example, to prove or disprove the identity of a signatory and/or the signatory’s intention to authenticate the document.
• Save where the contrary is provided for in relevant legislation or contractual arrangements, or where case law specific to the document in question leads to a contrary conclusion, the common law adopts a pragmatic approach and does not prescribe any particular form or type of signature. In determining whether the method of signature adopted demonstrates an authenticating intention, the courts adopt an objective approach considering all of the surrounding circumstances.

The Commission goes on to explain that the courts have, for example, held that the following non-electronic forms amount to valid signatures, and that electronic equivalents of these forms of signature are likely also to be recognised by a court as legally valid:

• signing with an “X”
• signing with initials only
• using a stamp of a handwritten signature
• printing of a name
• signing with a mark, even where the party executing the mark can write
• a description of the signatory if sufficiently unambiguous, such as “Your loving mother” or “Servant to Mr Sperling”.

The courts have also held that the following electronic forms amount to valid signatures:

• a name typed at the bottom of an email
• clicking an “I accept” tick box on a website
• the header of a SWIFT message.

Despite the Commission’s conclusions that the current law is sufficient, concerns raised by consultees as to its lack of clarity and its inaccessibility [4] compelled the Commission to consider possible approaches to codifying the law via legislative reform, and to recommend that further consultation would be required.

The Commission’s report even goes so far as to propose a draft legislative provision which: confirms that an electronic signature can be witnessed and attested; is intended to be technology neutral (to prevent it becoming outdated or obsolete, or favouring or excluding particular technologies or types of electronic information); would apply to the execution of deeds (as it applies to all situations where a signature is required); and which reflects the Law Commission’s view that an electronic signature can be witnessed in the same way as a handwritten signature and that, in addition to the signatory, a witness can sign electronically.

The Commission has also recommended that an industry working group be set up to specifically consider practical and technical issues associated with the electronic execution of documents. The Commission suggests that the group should consider how different technologies can help with identification and authentication and should produce best practice guidance for the use of electronic signatures in commercial transactions and by individuals, including focusing on issues surrounding security and reliability.

 …but the law of deeds should be reviewed

Also in line with its provisional view, however, the Law Commission has concluded that the requirement under the current law that a deed must be signed “in the presence of a witness” requires the physical presence of that witness; and that that remains the case even where both the person executing the deed and the witness are executing/attesting the document using an electronic signature.

Following on from that conclusion, the Commission has now recommended that there should be a review of the law of deeds generally, and that such a review should consider issues such as efficiency; whether the concept of deeds is fit for purpose in the modern commercial world; and whether technological alternatives and/or a concept of acknowledgement might work as an alternative, both for paper and for electronic deeds.

Where does that leave parties and practitioners for now?

It is clear that the issue of electronic execution is ‘one to watch’ and all indications are that we may soon have some clarified and codified legislation and good practice guidance which, together, will offer speedy but safe options for parties wishing to execute contracts or other legal documents.

However, in the meantime, section 91 of the Land Registration Act 2002 (LRA) does allow for certain electronic documents to be regarded as a deed; and section 91 LRA and Land Registry policy and practice together provide that certification of electronic signatures (which involves the stringent verification [5] of the identity of the person providing the digital signature) can take the place of the traditional ‘wet’ signature and attestation process.  That therefore seems to provide a practical ‘workaround’ – at least in the context of e-conveyancing.

In other contexts, the Law Commission’s reports comprehensively explains the existing law relating to electronic execution, electronic signatures and deeds. That, along with its considered conclusions that the law does allow documents including land contracts and deeds to be executed with an electronic signature, should go some way to providing comfort to clients and practitioners who wish to proceed with electronic execution in the interests of ease and efficiency, pending any further action or legislation from the Government.

Walker Morris will continue to monitor and report on key developments.

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[1] See our earlier briefing for further information and advice about the basic principles for formation of contracts
[2] Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market
[3] On 6 April 2018 the Land Registration (Amendment) Rules 2018 made it permissible for a disposition of land to be registered at HM Land Registry using digital documents with electronic signatures
[4] by virtue of relevant provisions being spread across different statutory and common law sources
[5] using the government’s ‘Verify’ service