Electronic Signatures – Update on Law Commission Report
In early 2018 we reported on the Law Commission’s preliminary report on e-signatures [see here] published ahead of the full consultation. The consultation ended late last year and in September the Commission published its final report and recommendations.
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.
The report sets out the Commission’s conclusions as to the law regarding the validity of electronic signatures. In summary:
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 19th 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.
In their report the Law Commission has made the following recommendations and options for reform to the Government:
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.
The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. PDT Solicitors LLP accepts no responsibility for the content of any third party website to which this webpage refers.