Signing documents electronically allows businesses and users to streamline their contracting process whilst providing an accurate audit trail of transactions. Digital signatures are quickly replacing handwritten signatures but the enforceability of these signatures may be questioned by users of e-sign platforms, such as Docusign, who have uploaded their templates. In this article we will address how signature laws apply and have been interpreted as we transition to a so-called paperless signing experience by drawing on the 'Electronic Execution of Documents Report' (2019) of the Law Commission and the Government's response to it.
The Electronic Execution of Documents Report
The Law Commission reported that they were aware of lingering uncertainties about the legal validity and enforceability of the use of electronic signatures in some transactions. On request from the Government, the Law Commission outlined how electronic signatures could fit into the current legal framework governing commercial and consumer documents, including deeds, but excluding wills and registered dispositions of land under the Land Registration Act 2002.
The Report identified that due to the absence of legislation specifically pertaining to the use of e-signature solutions in legal documents, users were uncertain about their enforceability. These concerns were only enhanced in cases of cross-border contracting, such as with the European Union, and with regards to authentication and data protection.
The Current Law on Electronic Signatures in Documents
In its report, the Law Commission stated that an electronic signature is capable of being used to execute a document, including deeds, in law. This will be the case provided that the person signing the important documents intends to authenticate it and any formalities relating to execution are satisfied, for example that the signature be witnessed or in a specified form. As such, employment contracts, tenancy agreements and a host of other day-to-day contracts, that do not require intricate negotiation, can now be generated, signed and managed electronically.
The report also concluded that electronic signatures are admissible as evidence in legal proceedings and can be used to prove the identity of a signature or their intention to authenticate the contract. In considering whether a signature demonstrates an authenticating intention, save where case law, legislation or contractual arrangements lead to contrary conclusions, the courts will take an objective approach by reference to all the surrounding circumstances. In law, under an objective approach, the intention of authentication will be concluded if, in the opinion of a reasonable person (not just the opinions of those party to the contract) consider that such would be intended by the person's actions.
Under this approach, and as applying to non-electronic signatures, the courts have considered that signing with an 'X', initials, stamps, a mark, as a description of the signature, providing their identity is sufficiently clear, (i.e. Mr Smith's Mother) or the printing of a name can all amount to valid signatures. Looking to these approaches, the Law Commission concluded that the use of electronic signatures on online documents equivalent to any of the examples above, are likely to be recognised by a court and there is no principle reason to think that electronically marking an 'X' to sign a document is less legally valid than physically marking an 'X'.
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Deeds, land and wills
Deeds differ from contracts due to their witnessing requirements. Whilst the Law Commission has accepted that deeds could be signed electronically, deeds, due to their special nature, must be signed in the physical presence of a witness who attests the signature (Freshfield v Reed). In its report, the Law Commission considered that deeds were in need of review as to their existence but also as to how to modernise the signing process and procedures of deeds to fit the e-sign framework. In its response to the Law Commission, the Government agreed, stating wider review of the law of deeds would be necessary and the Law Commission will be commissioned to undertake this task.
HM Land Registry, who handle registration and ownership of land and property in England and Wales have since published a guidance note on the use of deeds and e-signatures, stating that registration transfers and other deeds that have been electronically signed will be accepted, provided their requirements, such as mutual assent to the use of the e-sign platform, are obeyed. Similarly, due to self-isolation and shielded requirements as a result of the Covid-19 pandemic, the Government recognised that the execution of wills- particularly the witnessing requirement- became challenging and therefore the Wills Acts 1837 was amended to state that the 'presence' of those making and witnessing could be virtual, via video-link. This amendment will remain in place until 31 January 2022.
Outside of land registration and wills, the situation is less clear. For example, the common law requires a deed for any agreements that are made without consideration (where one party doesn't receive a benefit under the contract), such as guarantor agreements. Whilst the Law Commission has stated that it is therefore possible in principle for electronic signatures to be witnessed, it agreed that the current law probably doesn't support witnessing other than by physical presence. From this, we can conclude that whilst deeds have the potential to be signed electronically, the witnessing requirement (aside from the exceptions mentioned above relating to land ownership and wills) will likely need to be in person until law reform is implemented.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.