Law Society practice note on execution of a document using an electronic signature

27th September 2016

We are frequently asked what is and what is not permissible in terms of electronic signature of documents. The law is not as straightforward in this area as it might be – we summarised the position recently in this article.  To assist practitioners and clients alike, the Law Society, in conjunction with the City of London Law Society Company Law and Financial Law Committees, has now published a best practice note.

The practice note is concerned with contracts entered into in a business context rather than with consumers or private individuals.

Examples of electronic signature

The following are listed as examples of an electronic signature:

• a person typing their name into a contract or email concerning the terms of the contract
• a person electronically pasting their signature (e.g. in the form of an image) into an electronic version of the contract
• a person accessing a contract through a web-based signature platform and clicking to have their name inserted into the contract in the appropriate place
• a person using a finger, light pen or touchscreen to write their name in the appropriate place in a contract.

Simple contracts

As there is usually no statutory requirement regarding the execution of simple contracts, the practice note says that a simple contract may be concluded using an electronic signature.

Documents subject to a statutory requirement to be in writing/signed/under hand

• for documents in writing, the Interpretation Act 1978 states that “writing” includes “typing, printing, lithography, photography and other modes of representing or reproducing words in a visible form”. Where the contract is represented on a screen in a manner that enables its terms to be read properly, it will, according to the practice note, be “in writing”
• the test for determining whether something is a signature is whether the mark which appears in a document was inserted in order to give, and with the intention of giving, authenticity to it. For example, typing a name into an email may satisfy the requirement for signature
• a document is generally considered to have been executed under hand if it is executed otherwise than by deed. The insertion of an electronic signature with the relevant authenticating intention would be sufficient for a document to have been executed under hand.

Deeds

Under section 46 of the Companies Act 2006 a document is validly executed as a deed if, and only if, it is duly executed by the company and delivered as a deed.  According to the practice note:

• section 44 of the Companies Act 2006, which provides that a document can be validly executed by a company incorporated under the Act by signature by two directors or one director and the company secretary, can be achieved by each of the authorised signatories signing the deed, including by electronic signature, either in counterpart or on the same version (hard copy or electronic)
• delivery can be achieved through electronic signing, although the parties must ensure that the signing arrangements adequately address when delivery takes place (e.g. if the documents are to be held by solicitors pending completion).

Under section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 an instrument is validly executed as a deed by an individual if it is signed by him or her in the presence of a witness who attests the signature.  Section 44 of the Companies Act provides that a document can be validly executed by a company if it is signed on behalf of a company by a director in the presence of a witness who attests the signature.  The practice note says that where a signatory signs, including electronically, and a witness has sight of this, and the witness signs the attestation clause, including by electronic signature, the deed will have been validly executed.  The practice note states that to minimise the evidentiary risk it is preferable for the witness to be physically present when the signatory signs rather than witnessing through a live televisual medium.

Company minutes and resolutions

The practice note states that directors of a company that has adopted the Model Articles or Table A articles may pass a directors’ resolution by the relevant directors signing a resolution using an electronic signature.

Minutes of the proceedings of a general meeting that are signed by the chairman using an electronic signature will constitute evidence of the proceedings and a record of a resolution passed otherwise than at general meeting that is signed by a director or the company secretary using an electronic signature will constitute evidence of the passing of that resolution.

Members’ written resolutions may be signed electronically but, to satisfy the authentication requirements of section 1146 of the Companies Act 2006, must be confirmed in a manner specified by the company.  Where no such manner has been specified by the company, the communication must contain or be accompanied by a statement of the identity of the sender and the company must have no reason to doubt the truth of that statement.

Evidential weight

The practice note says that where an electronic signature is challenged the courts should adopt the same approach as they do where a “wet ink” signature is challenged. In other words, the document bearing the electronic signature would be accepted as prima facie evidence that the document was authentic unless evidence was adduced to the contrary.

Corporate authority for electronic signatures

It is possible – albeit extremely unlikely – that a company’s articles of association, or subsequent resolutions, prohibit electronic signatures. Assuming that the articles are silent on the question of electronic signature, there is no need for any resolution or minute authorising electronic, as opposed to wet ink, signatures.

Originals and counterparts

Unless there is a legal requirement to the contrary, it is possible to have originals of the same document in both hard copy and electronic form. Where a document has been executed electronically, there is no need for an additional wet ink version to be created.  Where a document has been executed using a combination of electronic and wet ink versions, a composite version may be created, and this will be accepted by the English courts. If an original version of a document executed electronically is required to be produced in evidence, the court will accept an electronic version or a hard copy print out.

Where an undated document is executed electronically, it may be validly dated with the authority of the parties by inserting the date electronically or by printing it out and inserting the date by hand.

Where a document has been executed electronically with each signatory applying their signature to the same file uploaded to the relevant signature platform, this will be treated as one counterpart.

The practice note states that documents executed electronically can be amended in wet ink and, conversely, wet ink documents can be amended electronically.

Conflicts of law issues

Where the governing law of the contract is not English law, the validity of electronic signatures will fall to be determined in accordance with the contract’s applicable law.

If an overseas company executes a contract governed by English law using an electronic signature, provided that the signatory is acting under the authority of the company, that contract will have been validly executed as a matter of English law. Questions as to the authority of the signatory should, however, be referred to overseas counsel for an opinion.

Location of signatory

Occasionally, the place of execution by the signatory may have legal consequences. In view of the difficulties of establishing where this is – relevant considerations include the physical location of the signatory and the location of the server – it may be prudent in these cases to use a wet ink signature.

Property documents

The practice note observes that the Land Registry and Land Charges Registry require a wet ink signature on paper documents submitted to them for registration and also that where stamp duty is payable, HMRC will ordinarily expect a wet ink signature.

Common seals

Where a party wishes to execute a deed by the physical affixing of its common seal, it is unlikely to be able to do this electronically.