Electronic Signatures – Update on Law Commission Report

The Commission’s report addresses the use of electronic signatures on a variety of documents used by commercial parties and consumers. Those documents include contracts, trust deeds and lasting powers of attorney (LPAs). The report does not extend to the use of electronic signatures on wills or documents concerned with land transactions, which are explicitly excluded from the scope of the report.

 

Legal validity of electronic signatures

 

The report sets out the Commission’s conclusions as to the law regarding the validity of electronic signatures. In summary:

 

• An electronic signature is capable in law of being used to execute a document (including a deed) 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 (for example, some documents must be signed in the presence of a witness).

• An electronic signature is admissible in evidence in legal proceedings. For example, to prove or disprove the identity of a signatory and/or the signatory’s intention to authenticate the document.

• The Courts have generally taken a pragmatic approach when considering any particular form or type of signature. Historically, many different forms of signature have been accepted as demonstrating intention to authenticate a document. For example, the Courts have accepted that the following analogue signatures are valid:

• signing with an ‘X’;
• signing with initials only;
• using a stamp of a handwritten signature;
• printing of a name;
• signing with a mark, even where the party executing the mark can write; and
• a description of the signatory if sufficiently unambiguous, such as “Your loving mother” or “Secretary to Mrs Oarton”.
• Electronic equivalents of these traditional forms of signature are likely to be recognised by a court as legally valid. The courts have, for example, held that the following digital signatures are valid:

• a name typed at the bottom of an email or an email signature;
• clicking an “I accept” tick box on a website; and
• the header of a SWIFT message.

 

Can deeds be electronically signed?

 

Whilst there are few issues with using electronic signatures for most contracts and agreements the legal position is less clear when the document in question is expressed to be a deed. The legal definition of a deed is not for this update, but if the document states on its face that it is a deed (using wording like "This Deed..." or "executed as a deed") then special care needs to be taken when signing it to ensure it is validly executed.

 

One issue considered by the Commission was whether a witness must be physically present when the deed is signed or can he or she view the act of signing by, say, video link. The Commission’s view on this issue is that, in order to be validly executed, the witness must be physically present when the deed is signed. This is the case even where both the person executing the deed and the witness are executing / attesting the document using an electronic signature. Therefore, as the law currently stands, witnessing by video link is insufficient to satisfy the statutory requirement of witnessing and attesting the signature on a deed.

 

It is disappointing that the Law Commission did not recommend a specific change to the current law on this issue given that the requirement for a witness to be physically present is an anachronism of 19^th century case law. Also, technology is now available that enables a witness to remotely verify a signature being made on a document and the witness can digitally sign at the same time. That the use of new technologies appears to be insufficient to enable an instrument to take effect as a deed is most unsatisfactory. However, the Commission did note that their report was deliberately “technology neutral” as one challenge of developing a specific technology solution is that it may become obsolete faster than the changes are enacted. This may account for their reluctance to deal with this issue more specifically.

 

It is noteworthy that the companies can side step the problem of having a witness physically present to attest the signature of a director as company law helpfully provides an alternative authenticating method. Two “authorised signatories” may sign a deed separately (and electronically if they wish) instead of a director of the company in the presence of a witness. An authorised signatory may be any director of the company and the secretary (or any joint secretary) of the company (where it is a private company with a secretary or a public company).

 

This is a helpful tip for companies wishing to use electronic signatures in circumstances where the physical presence of a witness is not possible. 

 

Recommendations:

 

In their report the Law Commission has made the following recommendations and options for reform to the Government:

• That an industry working group be set up to consider practical issues relating to the electronic execution of documents. The working group would be asked to provide best practice guidance for the use of electronic signatures in different commercial transactions as well as where individuals, particularly vulnerable individuals, execute documents electronically.

• The industry working group should consider potential solutions to the practical and technical obstacles to video witnessing of electronic signatures on deeds and attestation, so that the Government can consider legislative reform to allow for video witnessing.

• There should be a future review of the law of deeds and whether the concept remains fit for purpose. The review should take a holistic approach, and deal with both deeds executed on paper and electronically.

• Although the current law already provides for electronic signatures, the Law Commission has suggested that Government may wish to consider codifying the law on electronic signatures in order to improve the accessibility of the law.

 

It’s unfortunate that we will have to wait for legislative reform to change the law as it relates to the execution of deeds as it means this particular can is likely to be kicked down the road for some considerable time to come. That said, the Law Commission has clarified a number of the lingering uncertainties surrounding the use of electronic signatures which has to be welcomed, and which will hopefully lead to a greater acceptance and use of electronic signatures and signing platforms.

 

We will keep you appraised of any further developments in this area but if you require any advice or assistance in the meantime please do not hesitate to contact Noel Ruddy or Victoria Jessup.