With the outbreak of COVID-19 and the likelihood of an extended lockdown seeming ever more likely the custom of signing documents in person is no longer practical. As such we are being asked on a number of occasions whether electronic signatures can be used to complete contracts and other transactional documents. So what is an electronic signature and how can they be used?
What is an ‘electronic signature’?
An electronic signature (or e-signature) is a signature in electronic form rather than the ordinary signing formality of physically putting pen to paper. E-signatures are becoming increasingly common with the ever-increasing use of technology, the decline of paper use for environmental considerations and the simplicity of not having to be physically present to sign documents.
Further to this, virtual scanning procedures (where a ‘hard copy’ document is signed in wet ink, and then scanned and sent by email) may not be viable, as a signatory may not have access to a printer or scanner, especially with many people home working. Strict IT policies may also prevent the printing or scanning of documents outside of the office.
This is where electronic signatures can come into play. E-signatures can appear in a number of different forms such as, a signature as a .JPEG image (or similar image file), the simple typing of one’s name into a document, the signing of a document through an ‘e-signing platform’, the use of an ‘I accept’ or ‘I agree’ button or using a stylist/finger to sign a document on the touch screen or track pad of an electronic device.
Is my e-signature valid in English law?
In March of this year, the UK Government endorsed a report from the Law Commission on the execution of documents using electronic signatures. In this report, the Law Commission stated that electronic signatures are capable, in law, of being used to execute documents (including deeds) provided that the legal person signing intends to sign and be bound by the document they are signing and that any execution formalities are satisfied (for example if the document requires the signature to be witnessed). The report is mainly aimed at parties who wish to execute commercial contracts.
The Law Commission identified that not all e-signatures will carry the same evidential weight or fraud susceptibility. Simply typing a name into an electronic document is easy for anyone to do and is not as fraud resilient as a .JPEG (or similar picture file) of a signature. Signing through an e-signing platform offers further security and fraud prevention as two factor authentications are used by many providers to access the signature platforms. A completion certificate can also be provided at the end of the signing process. Evidential weight needs to be considered when deciding to use an e-signature as different methods of provision carry different levels of security.
What else should I consider?
Corporate capacity: It is important to check that if you are signing on behalf of an English company that the company articles do not restrict electronic signing and whether any further considerations need to be noted in the company board minutes.
Authority: If there are several parties involved in the execution of the document you need to check that you have the necessary authority to provide an e-signature upon execution and that the signatory intends to be bound by the document.
Internal risk policies: Some companies may have internal risk policies that prevent or allow electronic signatures. These should be thoroughly checked before a document is signed electronically.
Some documents may provide for certain formalities upon signing. The most prudent example of this is the requirement for a witness to the signature of a deed and the requirement for deeds to be executed as a whole. The Law Commission advised that virtual witnessing (for example over video link) is not possible and that any witness would need to be physically present, somewhat negating the use of e-signatures as a remote means of execution where a witness is required. It is worth noting that a witness can attest later or could also be a family member, although this may not be ideal should a signature be challenged.
When executing a document that requires a witness on behalf of an English company, it may be possible to avoid the need for a witness by executing a document via alternate means, for example the use of two director’s e-signatures rather than a director and a witness. Alternatively, the document may not have to be executed as a deed at all.
It is worth bearing in mind that the validity and evidential admissibility of electronic signatures may differ in alternate jurisdictions. This may need to be considered if there is a non-English law party, a non-English law document or the document allows for litigation in a non-English jurisdiction.
When will an e-signature not be appropriate?
In addition to the points above, there are several occasions where e-signatures will not be appropriate, for example documents that are registrable with the UK Land Registry. Other examples include documents that have restrictions regarding their execution in case law or legislation or documents where the place of execution is significant.
Companies House have recently changed their policy to allow for documents to be accepted including forms and resolutions that have been signed by e-signature in response to the Covid-19 crisis. HMRC have also temporarily put measures in place to allow the acceptance of certain electronically signed documents.
So, is it practical for me to use an E-signature?
When signing a document electronically, it is important to consider the intentions of the parties, the nature of the document and whether it is accepted by all parties that the document can be signed by one of them electronically. The type of electronic signature that the parties intend to use should be considered in light of security requirements. Consider using an electronic signature platform to bolster security measurements. Parties should further consider whether such use of cloud- based systems satisfy their own personal IT security policies.
It may still be possible for some parties to sign the document in traditional wet ink and for others to sign electronically. This may however mean the document has to be executed in counterparts, for which the document should provide. Records should be kept of how the parties intend to sign and the signing process so these can be referred to if needed in the future.
In conclusion, E-signatures are seeing an ever-increased use in commercial contracts but there are several considerations that should be addressed before an e-signature is used to execute any document. Particular attention should be drawn to the execution formalities including the potential need for a witness. Existing methods of execution may still be available if the document is signed in counterparts, for example printed at home, signed in wet ink and scanned to form an electronic document once signed.
For more information on the issues raised in this article or if you have any other questions relating to the running of your business in these unprecedented times and the execution of documents, then please contact a member of our corporate and commercial team on 01524 548494 or 01228 552600.
This alert does not provide a full statement of the law and readers are advised to take legal advice before taking any action based on the information contained herein.