The use of digital platforms has seen a global surge within the last 12 months, as businesses and practitioners have been confined to remote working environments – for many of which, this equates to setting up a desk in our living rooms or bedrooms.
In particular, the use of electronic signatures has increasingly been adopted by businesses and law firms – even prior to covid-19, and the general consensus seems to be that, they are commonly accepted in practice for simple documents. However, many are still skeptical as to the validity of such signatures and whether they satisfy specific formalities required by certain types of contracts. Despite some clarifications provided by the Law Commission’s report in 2019, the use of electronic signatures in practice is still a grey area amongst practitioners.
Statutory Law in England and Wales and the Law Commission’s Report
Currently, there is no statutory legislation under English law governing the use of electronic signatures. In 2019 the Law Commission sought to provide (some) clarification around this issue.
One of the key findings of the Law Commission’s Report, was that an electronic signature is capable in law of being used to validly execute a document, including a deed, provided that:
- the person signing the document intends to authenticate it; and
- any formalities relating to the execution of that document, are satisfied
The Law Commission’s findings were warmly welcomed, even more so as we approached the imminent pandemic in early 2020 when it soon became apparent that in-person execution of documents would become an impracticality.
Key Considerations of E-signatures
Whilst the convenience of electronic signatures in speeding up the completion process is very attractive, these technological advances also present some challenges, in particular from the perspective of security and reliability. Consideration should be given to the following:
- What type of electronic signature is being used?
- What type of document is being executed and are there any restrictions?
- Is the use of electronic signatures appropriate in the circumstances?
- What type of electronic signature is being used?
There are various types of electronic signatures, ranging from sophisticated signing software, to typing a name at the bottom of an email, or clicking the “I accept” tick box on a website. Recent case law hasfound that even the automated signature block generated at the end of an email, was sufficient to constitute a signature for the purposes of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
Inherently, electronic signatures are more susceptible to fraud in comparison to handwritten signatures, potentially putting vulnerable people at risk. The obvious example is where a signatory’s email account was compromised. Care also needs to be taken to avoid email correspondence unintentionally effecting an amendment, waiver, consent or release. The reliability and security therefore of these types of e-signatures remain open to criticism.
On the other hand, more sophisticated electronic signature platforms are available, developed specifically for the signing of contracts and documentation. These platforms usually involve the user uploading a document for signing to a secure cloud-based environment, which is then circulated to the signatories via an online link. The document may be PIN-protected allowing access only to individuals provided with the PIN, and upon the document being signed, the platform captures core information such as, the signatory’s email address, IP address, date and time of access, and any PIN entered. These types of signing platforms provide a greater degree of control, and provides a degree of evidence of the signatory’s intention to sign.
- What type of document is being executed and are there any restrictions?
Some documents may require certain formalities to be met in order for execution to be valid. The most significant challenge for electronic signature platforms, is meeting the requirement for documents to be signed inthe physical presence of a witness, a prime example of such documents being deeds.
The starting point would be (and as confirmed by the Law Commission’s Report), that an electronic signature can be witnessed. A document for execution might arrive into a computer, smart phone or other device, this document might then be opened and signed by the signatory, with the witness seeing the signature and countersigning on the same device. Difficulties start to arise in situations where documents are signed and witnessed on separate devices, with no way to establish whether the witness was in the same physical location as the signatory, and whether the document the witness is counter-signing is the same one that they saw being witnessed.
Conveyancers will no doubt be familiar with the ‘Mercury Signing Approach’ recently adapted by HM Land Registry for executing deeds, having published their guidance on the matter with effect from 4 May 2020. This approach allows for execution of deeds where the parties are not all present upon completion of a transaction, by printing and signing the signature page, in the physical presence of a witness. There are a number of other steps required in order to satisfy the HMLR approved Mercury method, and satisfying this criteria can be somewhat tricky.
One thing that is clear, is that execution of deeds cannot be witnessed remotely via a video call. For these reasons, there isn’t currently a wide practice of executing deeds electronically, and many practices are still going old school.
- Is the use of electronic signatures appropriate in the circumstances?
Electronic signatures are generally accepted in practice for simple contracts and documents. However, the appropriateness of using such signature will vary on a case by case basis and be dependent upon the specific circumstances – e.g. where there is a specific requirement for execution to be witnessed, as mentioned above.
Consideration should be given to any potential issues which may be further than the scope of this article, especially where these risks are less obvious. Whilst new technology undoubtedly creates space for greater efficiency in the delivery and execution of documents, it is worth remembering that old rules might still apply, and as such caution should always be applied.
Our view at Glaisyers, is that the appropriate method adopted should always be the one that is more efficient, secure and minimises risk for everyone involved in a particular transaction.
