MH Corporate

Tuesday 18th September, 2018

Electronic signatures in the digital age: update from the Law Commission

With physical meetings becoming less common and the desire to do things easily and more quickly always growing, in recent years there has been an increased demand for the use of electronic signatures which is viewed as a more efficient and convenient way of signing documents. However, certain parties remain hesitant because of practical or technical concerns. The Law Commission recently published a consultation paper on electronic execution of documents (the “Consultation Paper”) which invites views from the public on provisional conclusions and proposals in respect of electronic signatures and deeds.

This article provides a brief summary on the current legal position in England and Wales regarding electronic signatures in the context of commercial business contracts and highlights the new proposals set out in the Consultation Paper.

Current legal position

The Law Commission’s view is that where simple contracts are concerned, a combination of EU regulation, domestic legislation and case law suggests that, provided there is an intention to authenticate the document, an electronic signature has the same legal status as a handwritten signature. This does not extend to the few situations where the law expressly provides that a signature must be in ink or handwritten.  Nor does it apply to the signing of wills under the Wills Act 1837.

There are no legislative provisions currently in force in the UK which deal with electronic execution of deeds. A deed is a type of document with more stringent formality requirements than a simple contract which requires a single signature.  For example, a deed must be signed in the presence of a witness who attests the signature.  According to a Practice Note published by the Law Society and the City of London Law Society in July 2016 (the “Practice Note”), a deed is validly executed where a signatory signs a document using an electronic signature and another individual witnesses the electronic signature being placed on to the document and subsequently signs the adjacent attestation clause (using an electronic signature or otherwise).

Current thinking suggests that witnessing by video link is unlikely to satisfy the existing requirement that a deed must be signed “in the presence of a witness”.

Consideration should also be given to whether a document needs to be filed with an authority or registry and whether such authority or registry accepts electronic signatures. For example, the Land Registry and HMRC still require “wet ink” originals of certain documents.

Proposals in the Consultation Paper

Simple contracts

The Consultation Paper provisionally concludes that it is not necessary to provide a statement in statute that an electronic signature is as valid as a handwritten signature. However, it considers and welcomes views on the creation of an industry working group, potentially convened by Government, to consider practical and technical issues which may be influencing a party’s decision to execute a document electronically.

Deeds

The Consultation Paper acknowledges that the physical presence of a witness when the signatory signs is “best practice” but argues that the law should be more flexible – it should be possible for a witness to observe an electronic signature by video link and then attest the document by affixing their own electronic signature to it.

Other scenarios in which the witness would not actually see the signatory applying the electronic signature (but would have other evidence to suggest that it was in fact the signatory who signed) are also considered in the Consultation Paper:

  • Use of a signing platform
    A signatory and a witness may be logged on to the same signing platform but from different locations, having authenticated themselves through the use of a password. Although the witness would not be able to attest to having seen the physical act of signing, the witness would see the signature appear on the document and could be reasonably satisfied that the signature was applied by the signatory, given the login procedure. 
  • Concept of “electronic acknowledgement”
    The signatory would sign the document electronically, and then acknowledge to the witness that they had signed it, showing or sending the document to the witness. The witness would then sign the document with their own electronic signature and include a statement that the signatory had “acknowledged” the signature. The acknowledgement and witnessing would have to take place reasonably soon after signing.

Conclusion

It is now generally accepted that the law in England and Wales accommodates electronic signatures where simple contracts are concerned. Although there are no legislative provisions currently in effect that deal with the electronic execution of deeds, according to the Consultation Paper and Practice Note deeds can be executed using electronic signatures (both by the signatory and their witness) but it is best practice for the witness to be physically present and observe the signature being placed on to the document.

It will be interesting to observe the outcome of the Consultation Paper which favours the use of video links when witnessing documents and considers other scenarios where the witness would not actually see the signatory applying the electronic signature. Ultimately however, this consultation process will not be definitive; a test case to provide an authoritative ruling or a clear legislative statement, ensuring clarity on this area of law, would be helpful.

The consultation closes on 23 November 2018.

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The information and any commentary contained in this update is for general information purposes only and does not constitute legal or any other type of professional advice. Marriott Harrison LLP does not accept and, to the extent permitted by law, excludes liability to any person for any loss which may arise from relying upon or otherwise using the information contained in this bulletin. If you have a particular query or issue you are strongly advised to obtain specific, personal advice about your case or matter and not to rely on the information or comments in this bulletin.