The Law Society has issued a guidance note to assist parties who wish to execute commercial contracts using electronic signatures (e-signatures). The note clearly sets out the relevant law associated with the use of e-signatures and aims to increase confidence in the use of e-signatures.
As technology and market practice evolve, the use of e-signatures is becoming more commonly used. Whilst the Electronic Communications Act 2000 (ECA 2000) provides a statutory framework for the admissibility of e-signatures in England and Wales, it does not assist in determining whether a document signed with an e-signature has been validly executed.
The guidance note considers the wider principles of English Law to draw a conclusion regarding the validity of e-signatures. It should be noted that the guidance note is only applicable in England.
Recent EU legislation has established an EU wide legal framework for e-signatures. It provides that an e-signature shall not be denied legal effect and admissibility of evidence in legal proceedings solely on the grounds that it is in an electronic form. However, it is for national law to define the legal effect of e-signatures. To date the UK has not formally defined the legal effect and therefore the note provides some guidance as to the use of e-signatures in a commercial context.
Form of e-signatures
An e-signature can take various forms and the guidance note sets out various ways in which a document can be signed electronically. The methods include a person typing their name into a contract, a picture of a signature being electronically pasted into the document, using e-signing software and use of touch technology to draw the signature with a stylus pen or finger.
The note supports and details the validity of e-signatures in simple contracts, documents required by law to be signed and deeds.
- Simple contracts:
Generally, there is no need under English Law for contracts to be in a particular form. Therefore, a simple contract may be executed using an e-signature.
- Documents required by law to be signed:
The current legal views are that where a contract is executed using an e-signature it will have satisfied the statutory requirement to be in writing and signed for several reasons, including:
- ‘In writing’: The Interpretation Act 1978 defines ‘writing’ to include ‘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 which enables a person to read its terms properly, it will be ‘in writing’ at that point.
- ‘Signature’: Provided the e-signature which appears in the document was inserted with the intention of giving authenticity to it and is inserted at the appropriate place (i.e. next to the execution block), the requirements of a signature would be satisfied.
A deed must be in writing and be duly executed and delivered in order to be a valid deed. Deeds can be signed in electronic form by two directors or by one director and a company secretary. Alternatively, deeds can be signed by one authorised signatory, such as an attorney or director, using an e-signature in the presence of a witness who must observe the signing. If that person subsequently signs the adjacent attestation clause, using e-signature or otherwise, that deed will have been validly executed. It would be best practice for the witness to be physically present when the authorised signatory signs, as opposed to witnessing by video conferencing or similar.
Delivery can be achieved by e-signing but specific steps are to be taken to ensure the signing arrangements adequately address where delivery takes place.
If the authenticity of a document signed using an e-signature is challenged, it is likely that an English Court would accept the document bearing the e-signature as prima facie evidence that the document was authentic and, unless there was evidence to the contrary, that would be sufficient to deal with the challenge. The burden of proof is on the party questioning the authenticity of the documents.
One consideration to take into account when deciding whether to sign a document by electronic signature is to ascertain whether the document needs to be filed and whether the relevant authority/registry would accept electronic signatures.
- The Land Registry and the Land Charges Registry currently require a wet-ink signature on a paper version of any document submitted to them for registration, accordingly, do not accept e-signatures.
- Companies House accepts a certified copy of a charging document executed using an e-signature under its web-filing service, however it still requires a wet-ink certification when filing by post.
- Where stamp duty is payable on a document, HMRC normally expect to stamp a document with a wet-ink signature.
The guidance note will hopefully encourage parties to use, or consider using, electronic signatures. As technology evolves the use of e-signatures will become more common, accordingly, taking note of which documents can and cannot be signed electronically may enable a party to become more efficient in its day-to-day business.
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