Electronic signatures in the digital age: The Law Commission issues final Report

Tuesday 10th September, 2019

The Law Commission, the independent body created to keep the law of England and Wales under review and to recommend reform where it is needed, has published a new report on electronic execution of documents (“Report”).  This follows on from the Consultation Paper published in August 2018 on which we previously reported here.

Findings of the Report

The main findings of the Report are set out below.

  • The law of England and Wales accommodates the use of electronic signatures.
  • 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. The Law Commission interprets an “intention to authenticate” to be an intention on the part of the signatory to be bound by the document.  Examples of formalities that might be required include: (i) that the signature be witnessed or (ii) that the signature be in a specified form (such as being handwritten).
  • In relation to deeds (a type of document with more stringent formality requirements than a simple contract (eg. a deed must be signed in the presence of a witness who attests the signature)), the Law Commission’s view is that the requirement under the current law for a deed to be signed “in the presence of a witness” requires the physical presence of a witness and the current law probably does not allow for “remote” witnessing. This is the case even where both the person executing the deed and the witness are executing the document using an electronic signature.

The Law Commission explored various potential options for the execution of deeds electronically such as witnessing by video link, witnessing through a signature platform and a new concept of acknowledgement for electronic signatures.  The Report notes that the consultees were generally not in favour of these options but some of the issues could be revisited by the industry working group referred to in point 4. below.

In addition, in response to certain consultees’ views that the current law on deeds is arguably outdated particularly in light of recent technological developments, the Report recommends a future review of the law of deeds to consider broad issues about the efficacy of deeds and whether the concept remains fit for purpose.

  • An industry working group with multi-disciplinary membership should be convened by Government to consider practical issues relating to the electronic execution of documents. It should also 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.

Other points to note

Having concluded that the law already provides for electronic signatures, the Law Commission was reluctant to propose legislative reform simply ‘for the avoidance of doubt’.  It was concerned about disrupting existing confidence in electronic signatures, or disrupting established practices if legislation were to be prescriptive in terms of process or technology.  However, the Report notes that the Government may wish to consider codifying the law on electronic signatures to improve the accessibility of the law.

The Report does not extend to wills or registered dispositions under the Land Registration Act 2002, which have their own specific formalities to be satisfied.  Other public bodies, such as HMRC, are known to still require “wet ink” signatures on, for example, stock transfer forms.

Practical implications

The Report is welcome in clarifying and confirming the current legal position on electronic signatures.  It does not identify any issues with the way we are seeing clients commonly use electronic signatures to execute documents in corporate and commercial transactions. Accordingly, while some parties are still reluctant to use electronic signatures, this Report will provide further comfort that parties can sign documents electronically, and execute deeds so long as the witness is physically present with the signatory.  Given the speed at which advances in technology are made, it is also good to see that the Law Commission has recognised the risks around overly prescriptive and detailed legislation dealing with technology.

 

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