28th Jul 2016

Electronic signatures – Worth the paper they are (not) written on?

The Law Society has recently published a practice note on the use of electronic signatures in documents – it’s not legally binding as such, just their view (backed up by the opinion of a leading QC) of what presents good practice under English law.

The advance of technology and modern working practices has led to previous thinking on the subject becoming somewhat outdated. The note is aimed at business contracts, rather than those involving individuals or consumers. It does not concentrate on any one type of electronic signature – there are many. A person typing their name into a contract or e-mail containing the terms of the contract, and a person accessing a contract through a web-based e-signature platform and clicking to have their name inserted at the appropriate point are just two examples.

The note considers different types of commercial contract and assesses whether an electronic signature is sufficient. For example:

  1. Simple contract – The note concludes that where there is no legal requirement for a contract to be in any particular form, an electronic signature may be used.
  2. Documents which are required by statute to be in writing and/or signed and/or under hand – Here the note says that the use of electronic signatures satisfies all three requirements. So, for example, a contract which can be read on screen is “in writing”.
  3. Deeds – Statute provides that a company validly enters into a document as a deed if it is duly executed and delivered as a deed. Again the note confirms that the use of electronic signatures is valid as long as sufficient steps are taken to make clear when delivery takes place, particularly if the document is executed by the company but held by the company’s solicitor ahead of completion. Also the parties will need to consider the practical means to ensure that a witness genuinely does witness the application of the electronic signature.

The note finishes with some practical considerations which businesses should bear in mind, such as:

  • Does the person signing with an electronic signature have the requisite capacity? The question is no different from a signature using pen & ink, but query for example whether there is anything in the company’s constitution or board resolution which forbids the use of electronic signatures?
  • Is there sufficient certainty that the person “signing” is who he or she purports to be if they are on the other end of an e-mail link or apply their signature through a web based platform?
  • If the document needs to be filed or registered (for example at the Land Registry) will the filing authority or registry accept electronic signatures? The Land Registry currently requires wet ink signatures on paper documents, but that will probably change in the future.
  • If the place of signature or location of the document has particular legal consequences (as is the case in relation to stamp duty), where will a document executed using electronic signatures be deemed to have been executed? Might it be the case that a document stored electronically is deemed to be located where the server is? If location is important, it might be best to have a physical “wet” signing.

Whilst not definitive law, the note is a helpful expression of opinion by the Law Society and should be commended accordingly. It remains to be seen how far businesses and practitioners will follow the advice. Logic and the advance of technology, however, dictate that it will not be long before electronic signatures become the norm rather than the exception.

Written by Richard Wheeldon of Berwins Solicitors.

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