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The Practical Use of Electronic Signatures
3rd Sep 2020
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The Practical Use of Electronic Signatures - Linkilaw Solicitors
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The global pandemic and its resulting restrictions has meant that it has been impractical for lawyers and clients to meet face to face to finalise and sign paperwork. This has shone a spotlight on the use of electronic and digital signatures and this article considers the validity of electronic signatures under English law.

Why is getting a document signed important?

Ensuring you sign and receive countersigned documents is important, as the function of a signature (electronic or wet ink) is to evidence a party’s intention to authenticate the agreement. Intention to create a legally binding contract is a key component when assessing the validity of a contract.

What is an electronic signature?

Although simply typing your name at the bottom of an electronic document could be classified as an electronic signature, when wanting to use electronic means to complete a commercial transaction we would recommend either the use of an e-signing platform to generate an electronic representation of a handwritten signature or a digital signature platform using PKI cryptography which provides an audit trail regarding the execution of the document.

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Are all electronic signatures considered to carry the same weight as each other?

In short, no – as the signature is key to evidence a party’s intention to authenticate the agreement. Therefore, typing your name at the bottom of an electronic document (which could easily be carried out by someone who is not the signatory) is not considered to hold the same evidential weight as the use of a digital signature which relies on sophisticated technology to verify the signatory’s identity. It is expected that high value and/or complex transactions will demand more of this advancing technology to ensure that contracts are being entered into with intention by the correct parties, that the documents themselves cannot be tampered with and there can be little dispute over whether the document was intentionally signed or not.

Although the use of electronic signatures gives rise to questions on validity, on 3 March 2020, the Government endorsed the Law Commission’s report on electronic execution of documents and made it clear that businesses and individuals should feel confident in using e-signatures in commercial transactions. It is worth noting that, where a document is governed by the laws of another country – and not English law – the decision as to whether an electronic signature is acceptable should be decided in accordance with the laws of that jurisdiction.

What about deeds?

In the same way that no two types of electronic signature are created equal, neither are legal agreements. While the use of electronic signatures is generally permitted for simple contracts, the rules are slightly more complex for deeds, although the Law Commission’s Report of 2019 confirms that if the intention to authenticate the document exists and the formalities of executing the document (including a deed) are met that the signing of a deed via electronic signature should be considered valid if these conditions are met.

A deed most often presents itself as a legal document that transfers or confirms an interest or a right. It should be “delivered” – not just signed – which in practical terms means that when entering into a deed there are more formal requirements and as an individual, you are required to have an independent witness co-signing it with you. For example, your shareholders’ agreement or employment agreement may be prepared as a deed and should be co-signed by a witness. This can be impractical when using an electronic signature.

However, for deeds entered into by companies, either a third-party witness must be physically present when the deed is signed to attest the signature (which is still the case for e-signatures) or companies may rely on the signature of two authorised signatories who are permitted to sign separately, which is also a valid mechanism of executing a deed. Given current events, we believe it would be considered acceptable to execute deeds using the signatures of two authorised signatories who do not have to be in the same room to sign (which could be electronic as long as they have the audit trail of an e-signature platform).

Bottom Line

It goes without saying that all legal documents differ and have their own legal procedures, for example it is not permissible for a will to be e-signed. Your lawyer should help advise you on practical steps on how to best to complete transaction formalities during this challenging time, as electronic signatures are going to be relied upon much more heavily in current times. Contact us to discuss your specific situation or if you would like us to check whether an electronic signature is appropriate in your case.

Guidance is being reviewed as the pandemic unfolds by the Law Society.

Our legal commentary is not intended to be a comprehensive review of all developments in the law and practice. Please seek legal advice before applying it to specific issues or transactions.

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