To E-sign or not to E-sign?

The coronavirus pandemic and the consequent restrictions placed on individuals has seen physical gatherings to sign and execute documents become increasingly difficult.

In this article, we set out the recent guidance which has been provided by the Law Society on whether an electronic signature is sufficient to create a legally binding document. This article does not address the basis of contract formation.

The issue which arises is that whilst the use of electronic signatures has been allowed by the courts since the Electronic Communications Act came into force in 2000, the act itself is silent on whether electronic signatures can be used to execute legal documents validly.

The Law Society has published guidance, and more recently a Q&A which draws its conclusions from the wider principles of English common law, outlining how and when electronic signatures can be used to execute legal documents validly.

1. What is an electronic signature?

Whilst most of us think of DocuSign or something similar, an electronic signature can take many forms, including a person:

  • typing their name into an email or word document containing the terms of a contract;
  • electronically pasting their signature (e.g. in the form of an image) into an electronic version of the contract next to the relevant signature block;
  • accessing a contract through a web-based signature platform (such as DocuSign) and clicking to have their name (typed or in a handwritten font) automatically inserted into the contract next to the relevant signature block; or
  • using a finger, light pen, stylus or touchscreen to write their name next to the relevant signature block.

You should always be careful to make sure you are not entering into a contract by mistake in a quick email response.

2. So, can I use an electronic signature for any document?

Not all but the vast majority. Many businesses already use electronic signatures, and this has only been accelerated by the various lockdowns. Types of document which the Law Society has confirmed can be signed electronically include:

  • simple contracts;
  • personal guarantees;
  • contracts for the sale or other disposition of an interest in land;
  • contracts for the disposition of an equitable interest;
  • statutory assignments;
  • promissory notes;
  • stock transfer forms; and
  • board minutes, minutes of general meetings and directors’ and member’s written resolutions.

Broadly, using a signing platform or confirming agreement will therefore be sufficient to confirm that the document has been agreed.

We would recommend that you check any counterpart clauses within the agreement to make sure there are no stipulations which require the document to be signed in a certain way.

3. What about deeds?

A deed is more complicated to sign and different rules apply depending on the statute which applies.

Generally, for a deed to be validly executed, you need two people to be present as there is usually the signatory and a witness. This causes issues if you cannot be in the same room or use the same computer as a result of Covid-19.

A witness must observe the signing (i.e. he or she has sight of the act of signing) and must be aware that the signature to which he or she is attesting is the one that he or she has witnessed. If that witness subsequently signs the adjacent attestation clause (using an electronic signature or otherwise) that deed will have been validly executed.

4. So, can I witness a document over Zoom or similar?

Irritatingly the answer is not clear.

Although each matter will be settled on the facts of each case, it is currently unclear as to whether you can witness signatures through a web-based video platform such as Zoom.

The law states that the witness needs to be present. Whilst there is not a requirement for physical presence, we would recommend, as does the Law Society, that when executing a document which requires a witness, they are physically present when the signatory signs. This will reduce any evidentiary risk as to whether the witness genuinely witnessed the signature.

The guidance does say that a witness could consider witnessing through a window, at a distance or in an outside public space. The key thing is to be physically present and be able to see the person when they are signing the document.

For this reason, we have found ourselves standing outside client’s houses or places of business to make sure that a document is properly executed. Whilst it may seem like a lot of hassle now, it is much better to do this than to have to argue in the future as to whether a document was correctly signed. 

5. What about Land Registry documents?

In what was seen as good news for the property market, in 2020 the Land Registry confirmed that it would accept TR1s (the transfer document) which had been signed and witnessed electronically.

In normal times, this should be relatively easy as someone can lean over your computer, but with lockdown it is difficult to have an independent person present when using your computer. This means the old-fashioned route of a pen and paper could be easier.

6. What about wills?

The rules prescribing the signing of wills is complicated and we would recommend that you speak to one of our specialist lawyers about this to ensure that the proper process is followed and the will is executed in the correct manner.

7. What other points should I consider?

Before signing and executing documents using electronic signatures, you should also consider the following points:

  • is there anything in the company’s constitutional documents or board resolutions preventing the company from executing documents in that manner?;
  • is the document which is to be distributed, signed and held electronically in a manner which is sufficiently secure?;
  • if the document is to be filed with an authority or registry, will that authority or registry accept electronic signatures?; and
  • if the place of signature or location of the document has particular legal consequences (e.g. such as the payment of stamp duty), is the process in place to make sure that the relevant deadlines are hit?

8. Does Phillips offer signing by a web-based platform?

Yes! For certain documents we are able to do so. Please speak to your fee-earner to discuss your requirements and they will be able to advise whether it is possible.

If you have doubts, our team are ready to help you. Please contact Jack Gardener on 01256 854665 or email [email protected] to find out how we can help.

 

Disclaimer

This article is current at the date of publication set out above and is for reference purposes only. It does not constitute legal advice and should not be relied on as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.