Introduction
In this note we shall look at the law on electronic signatures and when electronic signatures can currently be used.
On 4 September 2019 the Law Commission published a full report on its project on electronic signature for England and Wales[1]. The Law Commission’s report addresses the use of electronic documents by commercial parties and consumers, including trust deeds and lasting powers of attorney[2].
The Law Commission focused on two aspects of the electronic execution of documents in particular, which have been identified as areas of uncertainty:
1. The use of electronic signatures to execute documents where there is a stautory requirement that a document must be “signed”; and
2. The electronic execution of deeds, including the requirments of witnessing and attestation and delivery.
The law on electronic signatures
Our laws on electronic signatures are derived from the following:
- EU Regulations: Regulation (EU) No 910/2014 has direct effect in EU member states from 1 July 2016;
- UK legislation: The Electronic Communications Act 2000
- Case law: The validity of electronic signatures is based on wider principles of English common law.
Background
Why are electronic signatures important?
With the advance in technology over recent decades, the way we conduct business has changed and it is now common practice for transactions to be conducted over large distances and often at short notice, which can sometimes make obtaining wet-ink signatures difficult.
Many simple contracts are concluded every day using electronic signatures instead of handwritten signatures. Electronic signatures can now take a number of different forms, including:
a) Where a person types their name into a contract;
b) Where a person types their name at the bottom of an email;
c) Where a person copies and pastes a picture file of their signature on the signature block of a contract;
d) Where a person accesses a website platform to complete a contract by typing his/her name in the signature block;
e) Where a person uses DocuSign or similar software to sign their name;
f) Where a person uses either their finger or a stylus to write their name on the signature block of a contract.
Outcome of Law Commission report
Meaning of “signed”
The Law Commission has stated that where there is a requirement for a document to be ‘signed’, electronic signatures can satisfy this requirement and the document will be legally valid and binding, provided that:
i) The person signing the document intends to authenticate the document, and
ii) Any formalities relating to execution of that document are satisfied.
[1] https://www.lawcom.gov.uk/project/electronic-execution-of-documents/
[2] It does not extend to wills, nor to registered dispositions under the Land Registration Act 2002, which are explicitly excluded from the scope of the project (wills are the subject of another Law Commission project that you can read more about at the following link: https://www.lawcom.gov.uk/project/wills/).
Execution of deeds
However, where documents must be executed as a deed there are practical considerations to overcome regarding attestation.
What is the role of the witness? The witness is simply attesting the signature of the signatory; the witness is not reviewing the contents of the document.
The Law Commission found that the witnessing requirements of deeds infers that the deed must be signed in the physical presence of a witness who attests the signature. The Law Commission has accepted this to be the case even where both the person executing the deed and the witness are executing / attesting the document using electronic signatures. It is much easier to comply with this requirement when using wet-ink signatures so deeds will still be routinely executed in hard copy until further reform in this area takes place.
NB: The only time that witnessing will not require attestation of a signature is when a company, rather than an individual, is executing the deed. In these specific circumstances, two directors (or a director and the company secretary) may both sign the deed without being in the same locality or physically witnessing the other’s signature.
Practical points to note using electronic signatures
A) The Law Commission’s report confirms that current legislation supports electronic signatures, confirming that they are capable of being used in law although noting that the electronic signatures must meet any contractual or statutory provisions.
B) Electronic signatures are admissible in evidence. It is admissible, for example, to prove or disprove the identity of a signatory and/or the signatory’s intention to authenticate the document.
C) Transactions can be concluded using both wet-ink and electronic signatures however, for practical reasons it may be easier to limit this to one format per document so that a fully executed version (with all of the signatures attached) can easily be compiled.
D) It is important to check that any institution or authority where the documentation will be submitted to afterwards accepts the electronic signatures too. At this time, various Government institutions will not accept electronic signatures, for example:
i) The Land Registry and the Land Charges Registry require a wet-ink signature on a hard copy version of any document submitted to them for registration;
ii) Companies House will accept a certified copy of a charging document executed using an electronic signature in satisfaction of the registration requirements under Section 859A of the CA 2006 (although, outside of its web-filing service, it still requires a wet-ink certification of the copy); and
iii) Where stamp duty is payable on a document, for example a stock transfer form, HMRC would expect to stamp a hard copy version of the stock transfer form with a wet-ink signature.
E) At this point in time, video witnessing of deeds does not meet the statutory requirements of witnessing a document.
Recommendations
The Law Commission has said that further review of this area of law is needed in order to provide clarity to the public and to ensure that we remain competitive in an international setting post-Brexit. The Law Commission has suggested reviewing video witnessing in particular, and whether to codify the existing law into one piece of legislation to make it more accessible.
If you should have any queries on the use of electronic signatures please do not hesitate to contact Amy Lapsevska.
