Electronic Signatures – Law Society Issues Guidance

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The Law Society has recently published a new practice note on the execution of documents using electronic signatures. The note is concerned with contracts entered into in a business context, rather than those to which consumers are a party. Below is a summary of the Law Society’s view of good practice on the use of electronic signatures. You can view the full practice note here. The use of electronic signatures is becoming increasingly common in a range of commercial transactions. Examples of the form that an electronic signature can take include (amongst others forms):

  • a party typing his or her name into a contract or email which contains the terms of the contract;
  • a party electronically inserting an image of his or her signature into an electronic version of the contract in the appropriate place;
  • a party clicking to have his or her name automatically inserted in a contract in the appropriate place, via a web-based e-signature platform; or
  • a party using their finger or stylus and a touchscreen to write his or her name electronically in the appropriate place in the contract.

Types of Documents

The practice note considers whether an electronic signature can be used to execute the following commercial contracts:

1. Simple contracts – Generally, in the absence of any (usually statutory) requirement, there is no need under English law for contracts to be in any particular form. A simple contract may therefore be concluded using an electronic signature.

2. Documents subject to a statutory requirement to be in writing and/or signed and/or under hand such as a contract for the sale of an interest in land in England and an assignment of intellectual property. In the opinion of the Law Society, a contract executed using an electronic signature (and which may exist only in electronic form) satisfies the statutory requirement for it to be in writing. Looking at each requirement in turn:

  • Where the contract is represented on a screen in a manner which enables a person to read its terms properly, it will be “in writing” at that point.
  • Provided the signatory inserts an electronic signature in the appropriate place in a document with the intention of authenticating the document, a statutory requirement for that document to be signed will be satisfied. It does not matter how the signatory inserted the electronic signature, nor does it matter in what form that signature was;

3. Deeds – It is opinion of leading counsel of the joint working party who prepared the practice note, that the approach outlined above would also apply in respect of deeds. For a document to be validly executed as a deed by a company it must be duly executed and delivered as a deed.

  • One of the ways in which a document can be validly executed by a company is by signature by two directors or by one director and the company secretary. This can be achieved by each of the two authorised signatories signing the deed (using electronic signature) either in counterpart or by one authorised signatory signing, followed by the other adding his or her signature to the same version (electronic or hard copy) of the deed.
  • Another of the ways in which a document can be validly executed by a company is if it is signed on behalf of the company by a director of the company in the presence of a witness who attests the signature.

According to the practice note, where a suitable signatory signs a deed using an electronic signature and another individual genuinely observes the signing (in other words he or she has sight of the act of signing and is aware that the signature to which he or she is attesting is the one that he or she witnessed), he or she will be a witness for these purposes. If that witness subsequently signs the adjacent attestation clause (using an electronic signature or otherwise), that deed will have been validly executed. It is best practice for the witness to be physically present when the signatory signs.

4. Companies: minutes and resolutions – Company documents (including minutes of a directors’ meeting and a members’ written resolution) signed with an electronic signature by a person and sent to a company (whether in hard copy or electronic form) will have been sufficiently authenticated, provided that the identity of the sender is confirmed in a manner specified by the company. The directors of a company that has adopted the Model Articles for private companies limited by shares, the Model Articles for public companies limited by shares or Table A articles may take a decision or pass a directors’ written resolution (as applicable) under those articles by the relevant directors signing a resolution using an electronic signature.

5. Using a combination of execution methods – So long as each party uses a valid signature method, it is possible for a document to be signed using a combination of different execution methods.

 

Can a document signed using an electronic signature be challenged?

Section 5 of the practice note advises that where the authenticity of a document signed using an electronic signature was to be challenged, an English court would apply the same principles as it would in relation to wet-ink signatures. The note sets out a list of evidence that may be possible to be used to prove the authenticity of a particular signature, such as evidence that the purported signatory or witness accessed the electronic document via his or her email account or computer or that he or she used a password, PIN or encryption key to access the document.

 

For more information on the use of electronic signatures in commercial contracts, or for advice on commercial law matters in general please contact John Pickervance, Associate Solicitor at Forbes Solicitors on 0333 207 1134, via john.pickervance@forbessolicitors.co.uk or through our Contact Form.

This entry was posted in Corporate & Restructuring.

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